What is the maturity date of a bond and why is it important?
Curious about Bonds
The maturity date of a bond is the date on which the issuer of the bond is required to pay back the principal amount to the bondholder. This is also known as the maturity of the bond. The maturity date is important because it determines how long the bondholder must wait to receive their principal investment back.
Bonds can have various maturities, ranging from a few months to several decades. In general, bonds with longer maturities tend to have higher interest rates, which compensates investors for the longer period of time they have to wait to receive their principal investment back.
The maturity date is also important because it affects the sensitivity of the bond's price to changes in interest rates. Bonds with longer maturities are more sensitive to changes in interest rates than bonds with shorter maturities. This is because the longer the maturity, the more future cash flows are affected by changes in interest rates, which in turn affects the bond's present value.