Difference between Money Market & Capital Market

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Comparison Chart

BASIS FOR COMPARISON MONEY MARKET CAPITAL MARKET
Meaning A segment of the financial market where lending and borrowing of short term securities are done. A section of financial market where long term securities are issued and traded.
Nature of Market Informal Formal
Financial instruments Treasury Bills, Commercial Papers, Certificate of Deposit, Trade Credit etc. Shares, Debentures, Bonds, Retained Earnings, Asset Securitization, Euro Issues etc.
Institutions Central bank, Commercial bank, non-financial institutions, bill brokers, acceptance houses, and so on. Commercial banks, Stock exchange, non-banking institutions like insurance companies etc.
Risk Factor Low Comparatively High
Liquidity High Low
Purpose To fulfill short term credit needs of the business. To fulfill long term credit needs of the business.
Time Horizon Within a year More than a year
Merit Increases liquidity of funds in the economy. Mobilization of Savings in the economy.
Return on Investment Less Comparatively High