1. GROUP 2

2.  A financial market is a market in which
people and entities can trade financial
securities, commodities, and other fungible
items of value at low transaction costs and at
prices that reflect supply and demand.
 Securities include stocks and bonds, and
commodities include precious metals or
agricultural goods

3.  The raising of capital in the capital markets
 The transfer of risk (in the derivatives
markets)
 Price discovery
 Global transactions with integration of
financial markets
 The transfer of liquidity (in the money
markets)
 International trade (in the currency markets)

4.  Capital markets which consist of:
 Stock markets, which provide financing through
the issuance of shares or common stock, and
enable the subsequent trading thereof.
 Bond markets, which provide financing through
the issuance of bonds, and enable the
subsequent trading thereof.
 Commodity markets: which facilitate the
trading of commodities.
 Money markets: which provide short term
debt financing and investment.

5.  Derivatives markets: which provide
instruments for the management of financial
risk.
 Futures markets: which provide standardized
forward contracts for trading products at
some future date; see also forward market.
 Insurance markets: which facilitate the
redistribution of various risks.
 Foreign exchange markets: which facilitate
the trading of foreign exchange.

6.  The capital markets may also be divided into
primary markets and secondary markets.
 Newly formed (issued) securities are bought
or sold in primary markets, such as during
initial public offerings.
 Secondary markets allow investors to buy and
sell existing securities.
 The transactions in primary markets exist
between issuers and investors, while in
secondary market transactions exist among
investors.

7.  As money became a commodity, the money
market became a component of the financial
markets for assets involved in short-term
borrowing, lending, buying and selling with
original maturities of one year or less.
 Trading in the money markets is done over
the counter, is wholesale.

8.  transfer of large sums of money
 transfer from parties with surplus funds to
parties with a deficit
 allow governments to raise funds
 help to implement monetary policy
 determine short-term interest rates

9.  Certificate of deposit - Time deposit,
commonly offered to consumers by banks,
thrift institutions, and credit unions.
 Commercial paper - short term usanse
promissory notes issued by company at
discount to face value and redeemed at face
value.
 Treasury bills - Short-term debt obligations of
a national government that are issued to
mature in three to twelve months.

10. 1. Maturity Period:
The money market deals in the lending and borrowing of
short-term finance (i.e., for one year or less), while the
capital market deals in the lending and borrowing of long-
term finance (i.e., for more than one year).
2. Credit Instruments:
The main credit instruments of the money market are
call money, collateral loans, acceptances, 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. Nature of Credit Instruments:
The credit instruments dealt with in the capital market
are more heterogeneous than those in money market.
Some homogeneity of credit instruments is needed for the
operation of financial markets. Too much diversity creates
problems for the investors.

11. 4. Institutions:
Important institutions operating in the' money
market are central banks, commercial banks,
acceptance houses, nonbank financial institutions,
bill brokers, etc. Important institutions of the capital
market are stock exchanges, commercial banks and
nonbank institutions, such as insurance companies,
mortgage banks, building societies, etc.
5. Purpose of Loan:
The money market meets the short-term credit
needs of business; it provides working capital to the
industrialists. The capital market, on the other hand,
caters the long-term credit needs of the industrialists
and provides fixed capital to buy land, machinery,
etc.

12. 6. Risk:
The degree of risk is small in the money market. The
risk is much greater in capital market. The maturity
of one year or less gives little time for a default to
occur, so the risk is minimised. Risk varies both in
degree and nature throughout the capital market.
7. Basic Role:
The basic role of money market is that of liquidity
adjustment. The basic role of capital market is that
of putting capital to work, preferably to long-term,
secure and productive employment.
8. Relation with Central Bank:
The money market is closely and directly linked with
central bank of the country. The capital market feels
central bank's influence, but mainly indirectly and
through the money market

13. THANKS……………