Page 34 - Introduction To Investment Management

Table 2.3: Types of Markets and instruments available.

• Treasury Bill
• Bankers Acceptance
Money Market • Commercial Paper
• Negotiable Certificates of Deposit
• Repo & Reverse

• Shares- (Common and Preferred Stock; Warrants)
Capital Market • Bonds - (Government Bond, Municipal Bond, Corporate Bond, other
long-term debt financing)

• Option Contract
Derivatives Market • Futures Contract
• Forward Contract

2.2.4 Different between Money Market and Capital Market

Based on early discussion, the Money Market and Capital Market can be

distinguished on the basis as follows: -

1. Maturity Period:

The money market instruments deal in the lending and borrowing or investing of short-
term finance (i.e., for one year or less), while the capital market deals in the lending
and borrowing or investing of long-term finance (i.e., for more than one year).

2. Credit Instruments:

The main credit instruments of the money market are certificates of deposits, bankers'

acceptance, repurchase agreements, commercial paper, and bills of exchange. On the

other hand, the main instruments used in the capital market are stocks, shares,
debentures, bonds, securities of the government.

3. Risk and Return Exposure:

There are more speculations in the capital market as compared to the money market
because capital market offers longer maturity periods on the credit instruments.

Moreover, higher returns are paid on the securities traded in the capital market to

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