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Definition of 'Maturity'

Maturity is the time at which a financial instrument becomes due and the principal amount is repaid. It can refer to the maturity date of a loan, bond, or other investment.

For loans, maturity is the date on which the borrower must repay the principal amount borrowed, plus any interest that has accrued. For bonds, maturity is the date on which the bond issuer must repay the principal amount of the bond to the bondholder.

The maturity date of a financial instrument is important because it determines how long the investor will have to wait before receiving their principal back. It also affects the interest rate that the investor will pay on the investment.

The longer the maturity date, the higher the interest rate will be. This is because the lender is taking on more risk by lending money for a longer period of time. The lender wants to be compensated for this risk by charging a higher interest rate.

The maturity date of a financial instrument can also affect its liquidity. A liquid investment is one that can be easily sold without having to significantly impact the price. Investments with longer maturity dates tend to be less liquid than investments with shorter maturity dates. This is because it takes longer to find a buyer for an investment that will not mature for several years.

Maturity is an important concept to understand for anyone who is investing in financial instruments. It is important to know the maturity date of any investment you make so that you can plan for when you will receive your principal back. You should also consider the maturity date when comparing different investments to see which one is the most suitable for your needs.

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