Question

In terms of the life of the securities offered, what is the difference between money and capital markets?

Short answer

Money markets deal with short-term securities and capital markets deal with long-term securities.

Step-by-step solution

The securities dealt in the money market

Money market is used for trading short-term securities. These securities have a life of one year or less. These securities are highly liquid and carry lower interest rates as compared to other financial securities such as treasury bills.

Securities dealt in capital market

Capital market offers long-term securities that have a life of more than one year. These securities offer higher returns and interest rates thanthe money market securities such as shares.