Question:
Differentiate between Capital Market and Money Market on the basis of :
(i) Investment outlay
(ii) Instruments
(iii) Safety
Differentiate between Capital Market and Money Market on the basis of :
(i) Investment outlay
(ii) Instruments
(iii) Safety
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Capital market: small outlay, shares and debentures, riskier. Money market: large outlay, treasury bills and commercial paper, safer.
Updated On: Oct 26, 2026
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Solution and Explanation
Step 1: Meaning of the two markets:
The capital market deals in long-term securities. The money market deals in short-term instruments of up to one year.
The differences on the given three bases follow.
Step 2: Basis (i): Investment outlay:
Capital market: there is no need for a huge amount. Securities can be bought in small units by small investors.
Money market: a huge investment outlay is needed as the deals are very large.
Step 3: Basis (ii): Instruments:
Capital market: the instruments are equity shares, preference shares, debentures and bonds.
Money market: the instruments are treasury bills, commercial paper, call money, certificates of deposit and commercial bills.
Step 4: Basis (iii): Safety:
Capital market: it is less safe, as returns and the safety of the amount depend on company performance and market conditions.
Money market: it is safer, as the instruments are issued by the government, banks and good firms and run for a short time.
Final Answer:
Capital market has a small outlay, shares and debentures as instruments and lower safety. Money market has a large outlay, treasury bills and similar instruments and higher safety.
The capital market deals in long-term securities. The money market deals in short-term instruments of up to one year.
The differences on the given three bases follow.
Step 2: Basis (i): Investment outlay:
Capital market: there is no need for a huge amount. Securities can be bought in small units by small investors.
Money market: a huge investment outlay is needed as the deals are very large.
Step 3: Basis (ii): Instruments:
Capital market: the instruments are equity shares, preference shares, debentures and bonds.
Money market: the instruments are treasury bills, commercial paper, call money, certificates of deposit and commercial bills.
Step 4: Basis (iii): Safety:
Capital market: it is less safe, as returns and the safety of the amount depend on company performance and market conditions.
Money market: it is safer, as the instruments are issued by the government, banks and good firms and run for a short time.
Final Answer:
Capital market has a small outlay, shares and debentures as instruments and lower safety. Money market has a large outlay, treasury bills and similar instruments and higher safety.
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