What Is A Maturity Date?
The maturity date is the date on which a note, drafts, acceptance bond, or other debt instrument’s principal amount becomes due. The principal investment is repaid to the investor on this date, which is usually printed on the certificate of the instrument in question, and the interest payments that were regularly paid out during the life of the bond cease to roll in. The maturity date also refers to the date on which an installment loan must be fully repaid (due date). The maturity date marks the period when the issuer (borrower) must repay the principal and interest to the holder of an interest-bearing asset at the end of its term (lender). The issuer’s contractual obligations are terminated after the maturity date has passed and the interest and principal have been repaid.
Classifications Of Maturity
Maturity dates are used to sort bonds and other types of securities into one of the following three broad categories:
Short-Term: Bonds maturing in one to three years
Medium-Term: Bonds maturing in 10 or more years
Long-Term: These bonds mature in longer periods of time, but a common instrument of this type is a 30-year Treasury bond. At its time of issue, this bond begins extending interest payments–generally every six months, until the 30 years loan finally matures.