Final answer:
Capital Markets are where equity and debt instruments with maturities greater than one year are traded; these include corporate bonds, government bonds, IRAs, and small CDs. Money Markets deal with shorter-term maturities, less than one year. Understanding the difference between these is important for investors and corporations in managing finances.
Step-by-step explanation:
The financial markets where equity and debt instruments with maturities greater than one year are traded are called Capital Markets. These include various long-term funding sources for organizations, such as corporate bonds, government bonds, and other financial investments like IRAs and small CDs. Conversely, the Money Markets are utilized for lending money with maturities of less than one year, facilitating short-term liquidity and funding needs.
Understanding the distinction between these two markets is crucial for corporations and individuals alike since they contribute to the process of raising financial capital and investing savings in a manner that can meet investors' preferences for rate of return, risk, and liquidity. Capital Markets serve as essential conduits for bringing together the suppliers of financial capital, like households, and the demanders of this capital, such as firms and governments.