How do you explain money market and capital market?
Money markets are markets that are close substitutes for money. It is a market for overnight to short term funds and instruments having a maturity of one year or less than one year. It is not a physical location but an activity that is conducted over the phone. Such markets are characterised by a collection of markets for several instruments. Often the credit worthiness of the participant is relevant. It is a highly liquid market wherein securities are bought and sold in large denominations to reduce the transcation costs. example Treasury bills, call money market, CD's etc.Capital markets on the other hand is a market for long term securities whethre equity or debt, which aims to mobilise long term savings to finance long term investsments, provide risk capital in the form of equity. encourages broader ownership of productive assets. It is wider than money market and constitutes all form of lending and borrowing. It improves the efficiency of capital allocation through competitive pricing mechanism
No comments:
Post a Comment