Share
What is bond maturity date?
Question
Lost your password? Please enter your email address. You will receive a link and will create a new password via email.
Answer ( 1 )
It’s not just about age. Bond maturity dates are determined based on the length of time you plan to invest in your bonds.
If you want to retire at 65, you should consider investing in short term bonds. Short term bonds mature within 10 years, while long term bonds take 20 years or longer to pay off.
You may also want to consider investing in a mix of both short and long term bonds. That way you can enjoy the benefits of both types of investments without sacrificing your retirement savings.
Longer maturity dates mean higher returns, which makes them ideal for investors looking to build wealth. But remember, the shorter the maturity date, the lower the return.
For example, a 30 year bond pays 5% per annum. A 15 year bond pays 4%. A 7 year bond pays 3% and a 1 year bond pays 2%.
So, if you were planning to retire at 65, the best investment strategy would be to buy a 30 year bond.
What about my risk tolerance?
There are risks associated with every type of investment. Bonds are no exception.
But, bonds are generally considered low risk because they tend to perform well during times of economic growth. And, historically speaking, bonds have outperformed stocks.
That said, bonds aren’t always a great fit for everyone. For instance, if you’re highly leveraged or have a large amount of debt already, bonds might not be right for you.
And, don’t forget, if you’ve got a lot of money tied up in bonds, you could lose a significant portion of your portfolio value if the market takes a turn for the worse.
Bond Maturity Date
When should you pay off your bonds? The answer depends on when you bought them.
If you purchased your bonds at least 10 years ago, you may be able to wait until after the end of this year (2019) to pay them off. However, if you bought your bonds within the last decade, you may need to pay them off sooner than that.
To find out whether you’re eligible for early payment, contact your broker or financial institution. They’ll tell you when you can expect to receive your refund.
Bond Redemption Date
If you’re investing in bonds, you need to be aware of when the bond redemption date is. This is the day when investors must pay back the principal amount of their investment.
When you invest in bonds, you receive interest payments during the life of the bond. However, at some point, the investor needs to redeem the bond. The redemption date is usually set between five and ten years after the original purchase date.
After the redemption date passes, the investor receives the full value of his/her investment plus any accrued interest. But there’s no guarantee that the investor will receive this cash payment. Some bonds may not mature until long after the redemption date.
Some bonds have a grace period where the investor doesn’t have to pay back the entire principal amount. After the grace period ends, however, the investor still owes the full amount.
There are two types of bonds: fixed rate and floating rate. Fixed rate bonds give investors a specific return each month, regardless of whether the price of the bond goes up or down. Floating rate bonds offer variable rates based on the performance of the underlying asset (such as the U.S. Treasury).
Fixed rate bonds typically cost more than floating rate bonds because they require lower monthly payments. Investors who plan to hold onto their investments for several years should consider buying fixed rate bonds.
Bond Maturity Dates
When you purchase bonds, you’re essentially lending money to the government. The interest rate you pay depends on when you purchased the bond.
The longer you hold onto your bond, the lower the interest rate you receive. This means that the longer you wait to sell your bond, the more profit you’ll make.
To find out how long you should hold onto your bond, use this formula:
Maturity Date (Interest Rate) / (Yearly Interest Rate) + 1
For example, let’s say you bought a 10 Year Treasury Bond at 2% interest per year. To calculate the maturity date, divide 2% by 12 months per year. So, 2/12 +1 equals 8 years.
If you sold your bond today, you’d make $2,000. But if you held onto it until its maturity date, you’d make $8,000!
That’s why it pays to be patient and wait to sell your bond.
Putting all together
Bond maturity dates are important because they determine how much interest you pay over the life of the bond. They also affect the price you pay for the bond.