Question

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

Accepted Answer

Distinction between ‘Capital Market’ and ‘Money Market’: Basis Capital Market Money market --- --- --- Participants The participants are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from members of the public The participants are institutional participants such as the RBI, banks, financial institutions and finance companies. Investment Outlay Securities do not necessarily require a huge financial outlay Transactions entail huge sums of money as the instruments are quite expensive Expected Return Generally yield a higher return for investors than the money market Generally yield a lower return for investors than the capital market OR Q. (b) Explain the following as factors affecting 'Long term Investment Decision: (i) Cash flows of the project and (ii) The investment criteria involved (i) Cash Flows of the project: When a company takes an investment decision involving huge amount it expects to generate some cash flows over a period. These cash flows are in the form of a series of cash receipts and payments over the life of an investment (ii) The investment Criteria involved: It involves a number of calculations regarding the amount of investment, interest rate, cash flows and rate of return. There are different techniques to evaluate investment proposals which are known as capital budgeting techniques.

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

Marking-scheme solution

More from Financial Markets

Basis	Capital Market	Money market
Participants	The participants are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from members of the public	The participants are institutional participants such as the RBI, banks, financial institutions and finance companies.
Investment Outlay	Securities do not necessarily require a huge financial outlay	Transactions entail huge sums of money as the instruments are quite expensive
Expected Return	Generally yield a higher return for investors than the money market	Generally yield a lower return for investors than the capital market

(a)OR(b)Distinguish between ‘Capital Market’ and ‘Money Market’on the basis of :(i)Participants(ii)Investment Outlay(iii)Expected ReturnExplain the following as factors affecting 'Long termInvestment Decision:(i)Cash flows of the project and(ii)The investment criteria involved

Marking-scheme solution

More from Financial Markets

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