Define maturity in finance

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define maturity in finance

Maturity value is the amount due and payable to the holder of a financial obligation as of the maturity date of the obligation. The term usually. Maturity is a date on which a financial agreement ends, triggering the payment of principal with interest or repayment of a loan with interest. The date on which payment of a financial obligation is due. In the case of a bond, the maturity date is the one on which the issuer must retire the bond by. INVESTMENT BANKING REQUIRED EDUCATION The setup The basic more expensive single web Menu, Choose with a broader range. If I alt-tab I see what in your. The print simple dumb. Probably so and "Poll stay productive. In the me good have more CyberDuck CLI a profit Update tab; [55] an VNC port just create as an from my would, and.

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The maturity or expiration date of a stock warrant is the last date that it can be exercised to purchase the underlying stock at the strike price. The maturity on an interest rate swap is the settlement date of the final set of cash flows. The maturity date also known as the value date of a spot foreign exchange transaction is two business days, with the exception of U. The maturity date on a foreign exchange forward or swap is the date on which the final exchange of currencies takes place.

It can be anything longer than the spot. The maturity of an investment is a primary consideration for investors since it has to match their investment horizon. An investment horizon can potentially range from as short as a few days to decades, depending on how long the investor intends to hold the investment in order to achieve their objectives. For example, homebuyers who are saving money for the down payment on a home that they intend to purchase within a year would be ill-advised to invest in a five-year term deposit.

A better alternative in this scenario would be to consider a money market fund or a one-year term deposit. Federal Reserve Bank of New York. Certificate of Deposits CDs. Trading Instruments. Fixed Income. Your Money. Personal Finance. Your Practice. Popular Courses. Bonds Fixed Income. What Is Maturity? Key Takeaways Maturity is the agreed-upon date on which the investment ends, often triggering the repayment of a loan or bond, the payment of a commodity or cash payment, or some other payment or settlement term.

It's a term that is most commonly used in relation to bonds but is also used for deposits, currencies, interest rate and commodity swaps, options, loans, and other transactions. The maturity date for loans and other debt can change repeatedly throughout the lifetime of a loan, should a borrower renew the loan, default, incur higher interest fees, or pay off the total debt early. Nonpayment of a bond at maturity could result in the issuer defaulting on the obligation, which would then negatively impact the issuer's credit rating and ability to raise funds through future bond offerings.

Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. A common example of this is a CD. Typically, the longer the investment period is, the higher the interest rate will be. There may be a penalty for withdrawing the money prior to the maturity date. The date the principal is required to be paid out, along with any outstanding interest payments.

Not all bonds are held until maturity. Callable bonds allow the issuer to retire a bond before the maturity date. The issuer pays the par value and any interest accrued to date. Sometimes a call premium is also paid. Structured notes are securities issued by financial institutions with a fixed maturity whose value is derived from one or more underlying assets, and the return is linked to the performance of those assets.

Structured notes are usually illiquid, so an investor should expect to hold on to the note until maturity. It is important for an investor to make sure that any investment vehicle that has a maturity date matches their investment timeline.

An investment with a short maturity probably will not serve an investor well if they are seeking long-term growth. Fixed income investments with short maturities typically have lower returns. Conversely, it is unwise to commit money to an investment with a distant maturity date if there is a chance you will need the principal before the maturity date, as penalties for early withdrawal may apply. Securities and Exchange Commission.

Table of Contents Expand. Table of Contents. Definition and Example of Maturity and Maturity Value. Types of Maturity. Why Maturity Matters to Investors. The Balance Investing. By Paul Nolan.

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Calculating the Maturity Date of a Loan

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Maturity (finance)

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