Money Market and Capital Market When we talk about Capital and Money Market, we can say The

capital and the money markets are two types of financial markets. The primar y difference between the two is that if the organizations have to borrow or inve st funds for a longer period of time then they go in the capital markets and if they want to borrow or invest funds for a short period of time then they go for the money markets. Secondly, capital markets deal with stocks and bonds while mo ney markets deal with certificates of deposits, bankers' acceptance, repurchase agreements and commercial paper. Thirdly, there are more speculations in the cap ital market as compare to the money market because capital market offers high ma turity on the credit instruments. Moreover, higher returns are paid on the secur ities traded in the capital market as compare to the money market because of the high risk in capital markets. In order to understand what the differences between things are you first need to understand what each of the items is. In this case before you can understand th e difference between capital markets and money markets you are going to need to understand what capital markets are and what money markets are. Once you underst and the two items are it will be easier to see what the difference or difference s are between the two markets. What is capital market? Basically the capital market is a type of financial market, it includes the stoc ks and bonds market as well. But in general the capital market is the market for securities where either companies or the government can raise long term funds. One way that the companies or the government raise these long term funds is thro ugh issuing bonds, which is where a person buys the bond for a set price and all ows the government or company to borrow their money for a certain time period bu t they are promised a higher return for allowing them to borrow the money, the h igher return is paid through interest that accrues on the money that the governm ent or company borrows. Another way that the companies or government can raise money in the capital mark et is through the stock market, most of the time you don't see the government as a part of the stock market, but it can actually happen so we need to include th em. But how the stock market works is that the companies decide to sell shares o f their stock, which is basically ownership in the company, to ordinary people a nd other companies, as a way to raise money. The people who buy the stock are us ually given dividends each year, if the company has agreed to pay out dividends, so that is another possible return on their investment. The capital market actu ally consists of two markets. The first market is the primary market and it is w here new issues are distributed to investors, and the secondary market where exi sting securities are traded. Both of these markets are regulated so that fraud d oes not occur and in the United States the U.S. Securities and Exchange Commissi on is in charge of regulating the capital market. What is the money market? Basically the money market is the global financial market for short-term borrowi ng and lending and provides short term liquid funding for the global financial s ystem. The average amount of time that companies borrow money in a money market is about thirteen months or lower. Some of the more common types of things used in the money market are certificates of deposits, bankers' acceptance, repurchas e agreements and commercial paper to name a few. Basically what the money market consists of is banks that borrow and lend to eac h other, but other types of finance companies are involved in the money market. What usually happens is the finance companies fund themselves by issuing large a mounts of asset backed commercial paper that is secured by the promise of eligib le assets into an asset backed commercial paper conduit. Your most common exampl es of these are auto loans, mortgage loans, and credit card receivables. What is the difference? Basically the difference between the capital markets and money markets is that c apital markets are for long term investments, companies are selling stocks and b onds in order to borrow money from their investors to improve their company or t o purchase assets. Whereas money markets are more of a short term borrowing or l

ending market where banks borrow and lend between each other, as well as finance companies and everything that is borrowed is usually paid back within thirteen months. Another difference between the two markets is what is being used to do the borro wing or lending. In the capital markets the most common thing used is stocks and bonds, whereas with the money markets the most common things used are commercia l paper and certificates of deposits.