What exactly is maturity when it comes to government bonds?
2eighty8 asked:
My work started giving us the option for Canada bonds a few months ago and I just started looking it up online now. It gave me a maturity date of sometime in 2017. If you can tell me what that means in layman, that’d be much appreciated. Thanks in advance.
My work started giving us the option for Canada bonds a few months ago and I just started looking it up online now. It gave me a maturity date of sometime in 2017. If you can tell me what that means in layman, that’d be much appreciated. Thanks in advance.
Governments around the world issue debt as notes and bonds (notes’ maturities are typically 2-10years; bonds are 20-30 years and more). The maturity of a specific note or bond is simply the date the government promises the prospective buyer it will repay the principal amount plus whatever regularly scheduled interest is also due at that time. Prior to the maturity date, the issuer (government in this case) usually makes semiannual or annual interest payments based on the coupon rate of the note/bond.
it means that in 2017 it will be worth whatever the cost is on the bond.
Let say its a 500 dollar bond. In 2017, you can cash it in and get yoru 500 dollars. If you cash it early, you will only get a portion of what it is worth.
Think of it as a maturing fruit. A fruit has to stay on the vine for a certain amount of time to reach its peak of ripeness. Same principle with bonds. I’d look at it carefully. a 10 year bond is a long time to have one issued for. Bonds are used to help the government pay debt usually
I am out of my league in this question, but I left you a comment in my Gordon Ramsey question. Great question, btw.