Jack Finance

UNIVERSITY OF LIVINGSTONIA
KANING’INA CAMPUS
FACULTY OF BUSINESS MANAGEMENT AND COMMUNICATION
DEPARTMENT OF ACCOUNTANCY
NAME : JACQUELINE MAZUNDA
REG. NUMBER : BAC/01/45/22
LECTURER : MR MLEZI
YEAR : 2
SEMESTER : 4
COURE TITLE :
TASK : BUSINESS FINANCING MANAGEMENT
COURSE CODE : BAC 2401
DUE DATE : 15TH FEBRUARY 2024

CAPITAL AND MONEY MARKET
Both money market and capital market are the types of financial market. Financial Markets
refers to any place or system that provides buyers and sellers the means to trade financial
instruments, including bonds, equities, the various international currencies, and derivatives.
Financial markets allocate limited resources in the nation’s economy thereby facilitate the
interaction between those who need capital with those who have capital to invest. . It serves
as an agent between the investors and collector by mobilising capital between them.
The money market is the trade in short-term debt. It is a constant flow of cash between
governments, corporations, banks, and financial institutions, borrowing and lending for a
term as short as overnight and no longer than a year.
The capital market encompasses the trade in both stocks and bonds. These are long-term
assets bought by financial institutions, professional brokers, and individual investors.
Together, the money market and the capital market comprise a large portion of what is
known as the financial market.
The Money Market
The money market is a good place for individuals, banks, other companies, and governments
to park cash for a short period of time, usually one year or less. It exists so that businesses
and governments that need cash to operate can get it quickly at a reasonable cost, and so that
businesses that have more cash than they need can put it to use.
The returns are modest but the risks are low. The instruments used in the money markets
include deposits, collateral loans, acceptances, and bills of exchange. Institutions operating
in the money markets include the Federal Reserve, commercial banks, and acceptance
houses.
When a company or government issues short-term debt, it's usually to cover routine
operating expenses or supply working capital, not for capital improvements or large-scale
projects.
About Liquidity
The money market plays a key role in ensuring that banks, other companies, and
governments maintain the appropriate level of liquidity on a daily basis, without falling short
and needing a more expensive loan and without hoarding excess cash that isn't earning
interest.
Individual investors may use the money markets to invest their savings in a safe and
accessible place. Many choices are available, including mutual funds that focus on state
money market funds, municipal funds, and U.S. Treasury funds. Many of the government
funds are tax-free. A money-market fund also can be opened at most banks.
The Capital Market
The capital market is where stocks and bonds are traded. Its movements from hour to hour
are constantly monitored and analyzed for clues as to the health of the economy at large, the
status of every industry in it, and the consensus for the short-term future.
The overriding goal of the companies institutions that enter into the capital markets is to
raise money for their long-term purposes, which usually come down to expanding their
businesses and increasing their revenues. They do this by issuing stock shares and by selling
corporate bonds.
Primary and Secondary
The capital market is roughly divided into a primary market and a secondary market. A
company that issues a round of stock or a new bond places it in the primary market for sale
directly to investors or institutions. If and when those buyers decide to sell their shares or
bonds, they do so on the secondary market. The original issuer of those stocks or bonds does
not immediately benefit from their resale, although companies certainly have an interest in
the price of their stock shares rising over time.
The capital market is by nature riskier than the money market and has greater potential gains
and losses.

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UNIVERSITY OF LIVINGSTONIA

FACULTY OF BUSINESS MANAGEMENT AND COMMUNICATION

NAME : JACQUELINE MAZUNDA

REG. NUMBER : BAC/01/45/22

TASK : BUSINESS FINANCING MANAGEMENT

COURSE CODE : BAC 2401

DUE DATE : 15TH FEBRUARY 2024

The Money Market

The Capital Market

Primary and Secondary

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