Maturity value definition
/What is Maturity Value?
Maturity value is the amount due and payable to the holder of a financial obligation as of the maturity date of the obligation. The term usually refers to the remaining principal balance on a loan or bond.
Which Factors Increase Maturity Value?
A number of factors impact maturity value, including the following:
Initial investment. A larger amount of principal initially loaned or invested results in a larger maturity value.
Interest rate. A higher interest rate will increase the amount of interest earned over time, thereby increasing the maturity value.
Time to maturity. The period of time until an investment reaches maturity impacts the maturity value. A longer period of time results in a larger maturity value, especially when interest compounding is used.
Frequency of compounding. The maturity value increases when the interest on the investment compounds at a rapid rate (such as monthly or quarterly), since interest is being calculated on a continually growing base.
Fees and taxes. Any fees charged against the investment, such as management fees, will reduce the maturity value.