Legal Definitions - at maturity

At maturity refers to the specific date or time when a financial obligation, such as a loan, bond, or investment, becomes due and payable. It signifies the end of the instrument's term, at which point the principal amount (and often any final interest) must be repaid or settled.

Here are some examples to illustrate this concept:

• Corporate Bond: A large technology company issues a 10-year bond to raise capital. An investor purchases one of these bonds. The bond specifies that the principal amount of the investment will be returned to the bondholder at maturity.

  Explanation: In this scenario, "at maturity" means that after ten years from the bond's issuance date, the company is legally obligated to repay the original investment amount to the bondholder. Until then, the investor typically receives regular interest payments.

• Certificate of Deposit (CD): An individual deposits $10,000 into a 3-year Certificate of Deposit at a bank. The CD offers a fixed interest rate for the entire term. The terms state that the principal and accumulated interest can be withdrawn without penalty at maturity.

  Explanation: Here, "at maturity" refers to the end of the three-year period. On that specific date, the investor gains full access to their initial $10,000 plus all the interest earned, without incurring any early withdrawal fees.

• Promissory Note: A small business borrows money from a private lender, signing a promissory note that outlines the terms of repayment. The note specifies that the entire outstanding loan balance, including any remaining interest, is due and payable at maturity, which is set for 18 months from the date of signing.

  Explanation: For this promissory note, "at maturity" marks the end of the 18-month loan period. On that date, the business must make the final payment to clear its debt to the lender.