Saturday, July 20, 2024

Maturity Date

In this article, We learn about “Maturity Date “.Let’s Go!

Maturity date is the date on which the principal or face value of a financial instrument, such as a bond or time deposit, matures and is paid by the issuer to the investor.

Look in more detail:

  1. Bonds: When a bond matures, the bond issuer agrees to repay the bondholder the full face value of the bond. For example, if an investor purchases a 10-year bond with a face value of $1,000, the bond’s maturity date is 10 years from the date of purchase, at which time the investor will receive $1,000 back from the bond issuer.
  2. LOANS: For a loan, the maturity date is the date when the loan principal is due and must be repaid to the lender.
  3. Derivatives: For a futures or options contract, the expiration date is the date on which the contract expires.
  4. Certificate of Deposit (CD): For a CD, the maturity date is the time when the deposit term ends and the deposited funds are returned to the depositor along with agreed upon interest.

Knowing the maturity date of a financial instrument is important because it tells you when you can expect to receive payment and is critical for assessing the risks and rewards of an investment.

Generally speaking, the longer the maturity, the greater the degree of price risk, which means that bond prices may fluctuate more as interest rates change. But businesses with longer maturities also typically pay higher interest rates to compensate for this price risk.

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