Maturity date

Definition

The maturity date is the specific future date when the principal amount of a bond is due to be repaid to the bondholder. This date marks the end of the bond's term, at which point interest payments typically cease.

5 Must Know Facts For Your Next Test

1. The maturity date determines when the issuer must repay the principal to investors and stop paying interest.
2. Maturity dates can range from short-term (less than a year) to long-term (more than ten years).
3. Bonds with longer maturities generally offer higher yields due to increased risk.
4. Upon reaching maturity, bonds are considered 'redeemed,' and no further interest is paid.
5. Investors may sell bonds before maturity, but market conditions will affect their selling price.

Review Questions

• What happens on the maturity date of a bond?
• How does the length of time until maturity affect a bond's yield?
• Can an investor sell a bond before its maturity date, and what might influence its selling price?

Related terms

Coupon Rate:

The annual interest rate paid on a bond's face value by the issuer.

Principal:

The original sum of money borrowed or invested, excluding any interest or dividends.

Yield to Maturity (YTM):

The total return anticipated on a bond if held until it matures, accounting for both interest payments and capital gains or losses.