Finschool By 5paisa

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Term to Maturity

Term to maturity

​The duration until a bond matures determines how long the owner will continue to receive interest payments on their investment. The principal is reimbursed when the bond matures. The length of time until a bond matures determines how long its owner will continue to receive interest payments.

The bond’s face value, or par, is returned to the owner when it matures.

If the bond has a put or call option, the term to maturity may change.

In general, the bond’s interest rate will be greater and its price on the secondary bond market will be less volatile the closer it approaches maturity. Additionally, the gap between a bond’s purchase price and its redemption value, also known as its principal, par, or face value, grows further away from its maturity date. Long-term bonds have higher interest rates to make up for the interest rate risk the investor is accepting. With the risk of missing out on a higher return if interest rates rise, the investor is locking in money for the long term.

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