Question:
Distinguish between Capital Market and Money Market on the following basis :
(i) Investment outlay
(ii) Duration
(iii) Safety
Distinguish between Capital Market and Money Market on the following basis :
(i) Investment outlay
(ii) Duration
(iii) Safety
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Capital market means small outlay, long duration and more risk. Money market means large outlay, duration up to one year and more safety.
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 such as shares and debentures. The money market deals in short-term funds and instruments with maturity up to one year.
We compare them on the three bases asked.
Step 2: Basis (i): Investment outlay:
Capital market: it does not need a huge investment, as securities can be bought in small units. Even a small investor can take part.
Money market: it needs a huge investment outlay, as instruments are traded in large amounts, so small investors rarely take part.
Step 3: Basis (ii): Duration:
Capital market: it deals in medium-term and long-term funds. Securities like equity shares have no fixed maturity at all.
Money market: it deals in funds for a short time, with maturity up to one year.
Step 4: Basis (iii): Safety:
Capital market: the risk is higher. The return and repayment of the money depend on the performance of the company and on market conditions.
Money market: instruments are safer and the chance of default is low, as the issuers are the government, banks and well-known firms.
Final Answer:
The capital market needs a small outlay, is long term and carries more risk. The money market needs a large outlay, is short term and is safer.
The capital market deals in long-term securities such as shares and debentures. The money market deals in short-term funds and instruments with maturity up to one year.
We compare them on the three bases asked.
Step 2: Basis (i): Investment outlay:
Capital market: it does not need a huge investment, as securities can be bought in small units. Even a small investor can take part.
Money market: it needs a huge investment outlay, as instruments are traded in large amounts, so small investors rarely take part.
Step 3: Basis (ii): Duration:
Capital market: it deals in medium-term and long-term funds. Securities like equity shares have no fixed maturity at all.
Money market: it deals in funds for a short time, with maturity up to one year.
Step 4: Basis (iii): Safety:
Capital market: the risk is higher. The return and repayment of the money depend on the performance of the company and on market conditions.
Money market: instruments are safer and the chance of default is low, as the issuers are the government, banks and well-known firms.
Final Answer:
The capital market needs a small outlay, is long term and carries more risk. The money market needs a large outlay, is short term and is safer.
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