Money Market Definition; Money market refers to the market for short

term assets that are close substitutes of money, usually with maturities of less than a year.

According to Geoffery Crowthec; ‘’Money market is a collective name given to the various forms and

institutions that deal with various grades of money’’

Instruments of Money MarketTreasury billsCertificates of Deposit.Commercial Paper.Bill of Exchange.

Main institutions of M.M Central Bank ( State Bank of Pakistan) Commercial Banks. Individual firms, companies.

Features of M.M;Market for short term funds.Deal with assets having maturity period less than 1 year.It is not a single market, but a collection of several submarket.It adjust the liquidity.

Objective of M.M;Provide opportunity for overcoming short term deficits.To provide access to user of short term to meet their requirement quickly adequately at reasonable cost.

Importance of M.M;Development of trade and industry.Development of capital market.It carry less risk than long term debt.

CAPITAL MARKET• “It is a market of new term bonds and securities in which people make investment.”•Capital market are financial market for buying and selling of long term debt and securities.

•Selling bonds and selling stock are two ways to generate capital.

•Stock and bond market are parts of capital market.

Types of capital market

•Primary Market•Secondary Market

• Primary Market

• The primary market is the part of the capital market that deals with issuing of new securities. Companies, governments or public sector institutions can obtain funds through the sale of a new stock or bond issues through primary market.

• Secondary Market

• A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The national exchanges - such as the New York Stock Exchange and the NASDAQ are secondary markets.

DIFFERENCE BETWEEN MONEY AND CAPITAL MARKET

  MONEY MARKET CAPITAL MARKET

DURATION Its for short term funds.(1yr or less)

Its for long term funds. (more than one yr)

NATURE OF FUNDS

Supplies funds for working capital requirements

Supplies funds for fixed capital requirements.

INSTRUMENTS T-bills, Commercial papers, certificates of deposits etc

Shares, debentures bonds etc. 

AMOUNT OF INSTRUMENT

Each single instrument is of large amount.

Each single instrument is of small amount.

  MONEY MARKET CAPITAL MARKET

INSTITUTIONS Central banks, commercial banks, bill brokers etc.

Stock exchanges, commercial banks and other institutions like insurance companies, etc.

RISK Less risk involved due to short term of maturity.

Risk is higher.

TRANSACTIONS Transactions are not at formal place.

Transactions are at formal place.

BROKER Transactions without the help of broker.

Transactions with the help of broker.

  MONEY MARKET CAPITAL MARKET

EXPECTED RETURN

Less returns Higher returns.

PARTICIPANTS

Individual investors, financial institutions, corporate house etc.

Commercial banks etc.

STOCK EXCHANGE

• The word “Stock Exchange” is made from two words 'Stock' and Exchange. Stock means part or fraction of the capital of a company, and Exchange means a transferring the ownership; representing a market for purchasing and selling. Thus, we can describe the stock exchange as a market or a place where different types of securities are bought and sold. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.

FEATURES OF STOCK EXCHANGE

• Organized Market: • Stock exchange is an organized market of securities (shares,

debentures, bonds, etc.) where the securities are bought and sold on the floor of a stock exchange. All transactions are regulated by the rules and bye-laws of the concerned stock exchange.

• Formation & Membership: A stock exchange is generally registered as an association or a society or a company. The membership of the stock exchange is restricted to a certain number, and new members are admitted only when there are vacancies. Every member has to pay the prescribed membership fee.

Only Members Can Trade: Stock exchange is only open to the members of exchange also known as brokers. Brokers act as an agent of the buyers and sellers of shares, debentures and bonds. In a stock exchange, transactions take place between members or their authorized agents on behalf of the investors.- Learn more at www.technofunc.com. Your online source for free professional tutorials.

Necessary to Obey the Rules and Bye-laws:While transacting in Stock Exchange, it is necessary to obey the rules and bye-laws determined by the Stock Exchange.

STOCK EXCHANGE MARKETS

• New York Stock Exchange (USA)• NASDAQ(USA)• Shanghai Stock Exchange(CHINA)• Japan Exchange Group (JAPAN)• Euronext(EUROPEAN UNION)

TAXATION• Definition:• Taxes are the most important source of Government

revenue. An economist has defined taxes as: “Taxes are the general compulsory contribution of wealth levied upon person, natural, or corporate to defray the expenses incurred in conferring common benefit upon the residents of the state.”

• Generally speaking, taxes are being paid for the social welfare of the people. The Government uses the tax revenue to create facilities and other necessary environment of the people.

KINDS OF TAXES• DIRECT TAX• INDIRECT TAX• PROPORTIONAL TAX• PROGRESSIVE TAX• REGRESSIVE TAX

• DIRECT TAX:

• These taxes are those whose incident cannot be shifted to anyone else. Such a tax is to be borne by a tax payer himself. Incidence of tax means a burden cannot be transferred to anyone else. • For example, income tax.

• INDIRECT TAX:

• It is the tax whose incidence is actually being shifted to the ultimate consumer. We can see the transferring process takes place from the entrepreneur right down on the ultimate consumer. An example of indirect tax would be daily commodities. E.g. food, clothing etc. The kind of taxes imposed are excise tax, sales tax. Etc.

• PROPORTIONAL TAX:• A proportional tax is

one that has to be paid at fixed rate, i.e. to say it is a fixed rate to everyone. • Thus, if the tax rate of

taxation as income tax is 5%, then it is the same rate as imposed.

• PROGRESSIVE TAX:• A progressive kind of tax

is that kind of tax which depends upon the level of income i.e. the higher it is the more is the tax and vice-versa. • In proportional tax the

highest income holder naturally pays higher income whereas in progressive tax he will be paying higher amount of tax.

• REGRESSIVE TAX:• Regressive tax reveals the

fact that with an increase in the income, tax burden is reduced and vice-versa.

• Such a tax is cruel in the sense that the burden is felt a lot more by the poor than the rich. Generally a government would not impose such a tax but nevertheless it does happen.