Question

Compare and contrast money market and capital market securities. Give examples of securities that are bought and sold in each market and why an investor may prefer to invest in one or the other.

Answer 1

Difference between money market and capital market is given below

Money Market	Capital market
It deals in securities having short term duration .	It deals in securities having medium or long term duration.
The investment in money market in safe and less risky due to short duration.	The investment is risky due to long time horizon.
As less risk is involved, return earned are low.	Higher risks leads to higher return.
Examples:- commercial papers, treasury bills, certificate of deposits and so on.	Examples:- equity Stocks, bonds, debentures and so on.

Investors would prefer money market because it has lower risk and low time duration over capital market. So, a risk averse investor would prefer this market

Where as Investors would prefer capital market because the return is high as compared to money market. So, a less risk averse investor will prefer this market.