Final answer:
Money markets trade securities that mature in one year or less, which usually carry low risk and high liquidity but are not all federally guaranteed. Capital markets deal with longer-term securities of more than one year's maturity. Federal backing is common for some money market instruments like T-bills but is not a requirement.
Step-by-step explanation:
Money markets deal with the trading of securities that mature in one year or less. Such securities typically include treasury bills, commercial paper, and certificates of deposit (CDs) that offer a low-risk investment option and have a high degree of liquidity. While these investments are designed to preserve the principal, they do not necessarily have to be guaranteed by the federal government; however, many money market instruments, especially those issued by the U.S. Treasury, are considered to be very safe due to the backing of the government's ability to tax and print money.
Capital markets, on the other hand, deal with longer-term financing where securities such as government savings bonds, long-term CDs, IRAs, and corporate bonds are traded. These investments usually have a maturity of more than one year. Capital markets offer different opportunities and risks compared to money markets