Maturity Definition. What is Maturity? Maturity refers to the date that a financial instrument expires and final settlement of specified obligations are to be completed. Typically, Maturity is the date that a bond or debt instrument issuer must pay to the holder any principal and accrued interest. The term may also apply to interest rate swaps in that it is the actual date after which interest is no longer accrued. Stocks and currencies do not have maturity dates, yet futures contracts and options may have expiration dates. Generally, investors in bonds with lengthy maturity dates take on an inordinate amount of risk since inflation, if not controlled, can undermine the purchasing power of the amount of principal invested. However, bonds may be prudent investment during times of low interest rates and low inflation. The present bull market in bonds began 20 years ago, with bonds appreciating over the period due to declining interest rates and reasonably low inflation. Many analysts believe that favorable period for bond ownership has now ended since interest rates have hit their lowest levels and must go up in the near term future.
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