Understanding the Capital Market and Money Market: Essential Pillars of the Financial System
In the intricate web of the financial system, two vital components stand out: the capital market and the money market. Each serves distinct yet interconnected purposes, contributing to the robustness and efficiency of the global economy. Let's delve deeper into what defines these markets and their pivotal roles. Capital Market: Nurturing Long-Term Growth At the heart of the capital market lies the facilitation of long-term investments, with a focus on securities maturing over one year. Its primary objective? To enable businesses and governments to raise capital for expansive projects and initiatives. Here's a breakdown of its key characteristics: Focus: Long-term investments with maturities exceeding one year. Goal: Facilitate the raising of capital for businesses and governments. Instruments: Stocks, bonds, derivatives. Participants: Companies issuing securities, investors purchasing them, investment banks facilitating transactions. Risk/Return: Generally higher risk, off...