Question

Distinguish between Capital Market and Money Market on the basis of :
(i) Participants
(ii) Investment Outlay
(iii) Expected Return

Hint:

Capital markets are long-term and yield higher returns; money markets are short-term and more liquid.

Answer 1

Capital Market vs Money Market:
Participants: Capital market involves investors like individuals, institutional investors, etc., whereas money market involves RBI, banks, large corporate houses.
Investment Outlay: Capital market requires larger outlays as investments are in long-term instruments like shares; money market requires smaller outlays in instruments like treasury bills.
Expected Return: Capital market offers higher but riskier returns. Money market gives lower but safer returns.
OR
(b) Factors affecting Long-Term Investment Decision:
Cash Flows of the Project: Cash inflows and outflows determine the viability of a project. Consistent positive cash flows make a project favourable.
Investment Criteria Involved: Techniques like NPV, ROI, Payback Period help evaluate the profitability and risk before investment decisions are made.