MONEY MARKET TOOLS V.S. CAPITAL MARKET TOOLS

MONEY MARKET TOOLS V.S. CAPITAL MARKET TOOLS

MONEY MARKET TOOLS V.S. CAPITAL MARKET TOOLS

Money markets and financial markets are both types of financial markets. Financial instrument in economics is aIDressed as a system that facilitates the trading of financial securities and goods at low costs. On the other hand a market can be defined as a place where buyers and sellers interact and make it possible to transact goods and services. The securities and commodities traded include stocks, bond, agricultural goods and any other valuable good. Prices in these markets reflect effective market theory. Financial markets are crucial factors in an economy because without the financial markets it will be hard for both the borrowers and the lenders to find each other. Banks are an example of an intermediary which collects money from the depositors and provide loans and mortgages to those who are willing to borrow. The stock exchange enables companies to sell their shares to the public. (Sherris)

Money markets facilitate transfer of liquidity with assets that require a maturity of one year or less. Transactions that occur in the money markets involves bankers acceptance, federal funds, treasury bills, short term mortgages, commercial papers and securities that are backed by an asset. It offers liquidity support for the financial system globally. Money markets have financial institutions which are willing to offer or receive credit. These money transactions are meant for short term periods of not more than one year. Commercial papers are the short term instruments that are used in money markets

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