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Simple English definitions for legal terms
maturity value
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A quick definition of maturity value:
Term: Maturity Value
Definition: Maturity value is the amount of money that is owed and needs to be paid back on a certain date. This date is called the maturity date. It is the final amount that needs to be paid to complete the obligation.
A more thorough explanation:
Definition: The maturity value is the total amount that is owed and must be paid on the maturity date of a financial obligation.
Example 1: A person invests $10,000 in a certificate of deposit (CD) with a maturity period of 5 years and an interest rate of 3%. At the end of the 5-year period, the maturity value of the CD will be $11,592.74, which includes the original investment plus the interest earned.
Example 2: A company issues a bond with a face value of $1,000 and a maturity period of 10 years. The bond has a coupon rate of 5%, which means that the company will pay $50 in interest each year. At the end of the 10-year period, the maturity value of the bond will be $1,000, which is the face value of the bond.
These examples illustrate how the maturity value is calculated based on the original investment or face value, the interest rate or coupon rate, and the length of the maturity period. The maturity value represents the total amount that must be paid to fulfill the financial obligation on the maturity date.