What is the Final Maturity Date?
A final maturity date is the date upon which all principal and interest must be repaid.
How Does the Final Maturity Date Work?
Any debt instrument is made of interest and principal components which an issuer is implicitly obligated to repay. Though interest and principal may be repaid in a number of ways according to the terms of the security, the final maturity date represents the legal deadline by which the entirety of principal and accrued interest on a debt instrument must be repaid to the holder.
To illustrate, suppose company XYZ issues a 10-year bond with a $1,000 par value and a 5% simple annual coupon yield. If the bond's final maturity date is 31 December 2019, the $500 in interest (($1,000 * 0.05) * 10 = $500) plus the original $1,000 par principal must be paid in full no later than this date with no outstanding balance.
Why Does the Final Maturity Date Matter?
The repayment schedule differs from one interest-bearing instrument to another, but the final maturity date universally demands repayment of both principal and interest.
