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What Is a Maturity Date?

The maturity date is the date in which a fixed income’s principal must be repaid to the lender. On this date when the principal is repaid, the interest rates that have been steadily paid out will cease. Investors are able to receive their capital without a fee or penalty and redeem accumulated interest.

Bonds are classified into three ranges depending on their maturity dates. Short-term bonds last for one to three years, medium-term last 10 or more years, and long-term include 30-year treasury bonds. The maturity date will be printed on the certificate of the financial instrument involved. The maturity date specifies a security’s lifetime and tells holders when their principal will be returned. Also, it specifies the time frame over which holders will be paid interest.

Different Ways the Maturity Date Is Used

The maturity date can be used in a variety of ways by financial institutions and investors on the stock market

Bond Maturity Date 

Bond maturation is the period of time in which a bond’s investor will earn interest payments on their investment. If the loan is able to fully mature, then the holder will be repaid.

Long-term bonds will have a higher interest rate which means that their prices will fluctuate less on the secondary market. Plus, these bonds have a higher interest rate to account for the additional interest added to the bond. With a short-term bond investors will be paid less interest which grants them more flexibility.

Loan Maturity Date

The loan maturity is the date when the full balance is due. This is after all the debt has been paid off of the promissory bond. With a secured loan, the borrower would not own any of the assets. Loan maturity dates can change due to refinancing in order to negotiate the details of the loan.

Life Insurance Maturity Date

When you reach the age of 100, your life insurance policy will mature. Meaning when you reach this age, you will be paid the full amount of your policy.

Life insurance policies are guaranteed not to change and are much less expensive. Premiums are only charged for the length of the policy, during which time they generate a cash value. Due to the fact many do not survive to age 100, the policy will pay a beneficiary upon your death, which is specified in the policy. 

What Is Maturity Value?

Maturity value is the sum that an investor will earn on the due date or at the maturity of a security that has been held for a period of time. The interest payments can be compounded if at maturity all of it has been paid.

The lender would apply all of the compounding interest to the original investment in order to find the maturity value. Maturity value will often depend on the type of interest that an investor is utilizing for the investment.

How To Calculate Maturity Value

In order to calculator maturity value, financial analysts would multiply the principal sum by compounding interest. Then it is calculated by one plus the rate of interest to the power of periods for the investment.

The equation to calculate maturity value is:

Maturity Value = P * ( 1 + R )^N


P: Principal Sum

N: Number of Periods in the Investment

R: Rate of Interest

Simple Interest 

Calculating simple interest is an easy way to figure out how much interest that you will owe on a loan. You can find simple interest by multiplying the daily interest rate to the principal by the period of time that passed between each of your payments.

The equation to simple interest is:

Simple Interest = P * R * N


P: Principal Sum

N: Number of Periods in the Investment

R: Rate of Interest

Consumers who pay their loans on time or early next month will profit more from simple interest.

Simple Interest Example

Alex purchases a brand new boat with an interest only loan. It is set up so that he pays only the interest on the value of the boat at the beginning of each month. The boat is valued at $100,000 and Alex pays 5% interest per year on the boat.

Alex’s Monthly interest payment would equal:

= 100,000 * 5% * 1

= 5,000

Therefore, Alex’s Monthly interest payment using simple interest would then be $5,000.

Compounding Interest

Compound interest is the interest on a loan that is measured using both the original principal and the interest accrued over time.

The equation to compounding interest is:

Compounding Interest = P * (1 + (R/N)) ^ N*T


P: Principal Sum

N: Number of Periods Interest is Applied in the Investment

R: Rate of Interest

T: Number of Periods Elapsed

Compounding Interest Example

Imagine that you put $3,000 in a savings account with an annual percentage yield of 0.40%, and this investment will compound interest monthly. If no deposits are made then after two years, then your balance would grow to around $3,024.09

How To Solve:

Since it is compounded 12 times a year, the interest rate at each compounding time is 0.40% ÷ 12 or 0.0333333%.

Current principal is $3,023.08

Interest earned on $3,023.08 is $3,023.08 × 0.000333333 = 1.01

This makes your new principal $3,023.08 + $1.01 = $3,024.09

Understanding Maturity Dates

The maturity date is the date on which a fixed income’s principal must be repaid to the lender. Investors are able to receive their capital without a fee or penalty and redeem accumulated interest.

Financial advisors can help determine what portion of your portfolio should be invested in order to meet your financial goals. A financial advisor can help you execute trades and help you plan out your future. You should consider consulting a financial advisor to help you manage your finances so that you can build your wealth