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Mature Velue
Maturity value is the sum of future cash flows for investment.
Maturity values matter because they can impact your financial planning by clearly showing how much money you will have available at a given time in the future.
There are two types of maturity values: 'full' and 'partial'. A full maturity It assumes that all principal and interest earned through the end of the term will be reinvested into an account earning a similar rate. A partial maturity value only takes into account the amount of money invested, not any earnings on the principal.
Let's say that you have $1000 and it will be 5 years before you need to use that money. You can look at the maturity values of different investment options and pick one for your $1000, based on how many years you could 'safely' leave that money invested.
When deciding what to do with a sum of money, you can use a maturity value to find out how long you could leave that money invested and still have it worth the same amount or more.
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Written by True Tamplin, BSc, CEPF® Updated on June 14, 2022
Maturity Value is the estimated future benefit of the investment at its scheduled date of maturity. It is most often used to describe bank accounts , certificates of deposit, and other similar investments.
In simple terms, maturity value can be viewed as an “estimated future benefit.”
Maturity values matter because they can impact your financial planning by clearly showing how much money you will have available at a given time in the future.
Such calculations can help you see whether or not you will have enough money to cover surprise emergencies, retirement income needs, and other financial goals.
To calculate maturity value, you first need to know your investment’s terms (e.g., the amount of money invested, interest rates , and due date).
There are two types of maturity values: “full” and “partial”.
This is the most common type of maturity value. It assumes that all principal and interest earned through the end of the term will be reinvested into an account earning a similar rate.
A partial maturity value only takes into account the amount of money invested, not any earnings on the principal (e.g., if the principal grows because of compound interest ).
The best way to determine when you should consider using a maturity value is to assess your financial planning situation. If you are unsure about what long-term goals you should be saving for, maturity value calculations can help.
If you are comfortable making assumptions about the future value of your money, then you can use a maturity value to estimate how much money will be available in the future. If not, then you may want to avoid using a maturity value.
When planning for the future, it is important to understand that there are a variety of factors that can impact how quickly a maturity value grows. These include:
All of these factors can impact how quickly your maturity value will grow and thus how long it will be until you have access to those funds.
Even with this knowledge, it is still beneficial to use a maturity value as one of many tools in your financial planning.
The downside of using maturity value, is that it does not consider the possibility of an early withdrawal, penalty-free.
Maturity values do not account for the possibility of changes to your estimated future benefit.
For example, if you are relying on your maturity value to cover an emergency expense and that amount is incorrect, then it may not be enough money to purchase the same goods/services at that time.
Maturity values allow you to estimate the future value of money and thus help you better plan for your future financial needs.
Maturity values matter because they can impact your financial planning by clearly showing how much money you will have available at a given time in the future.
A full maturity value can be viewed as an “estimated future benefit”.
There are a variety of factors that can impact how quickly a maturity value grows.
It is beneficial to use a maturity value as one of many tools in your financial planning, but it’s important to understand not to make assumptions about the future value of your money.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute , as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website , view his author profile on Amazon , or check out his speaker profile on the CFA Institute website .
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Durable power of attorney refers to the legal authorization one party gives to another to make important decisions for them. These often include decisions regarding Medicare and other health insurance issues.
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Maturity value is an asset's value after it has reached full maturity. Many life insurance policies have maturity dates.
If the person reaches their life insurance's maturity date, the insurance contract will often stipulate that the insurer will have to pay the death benefit, or the cash value, directly to the insured.
The maturity date of life insurance policies are typically set at the policyholder's 100th or 121st birthday. Since very few people reach this age, death benefits normally go to the beneficiary instead of the policyholder.
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Home » Finance » Blog » Finance Formula » Maturity Value Formula
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Maturity Value Formula (Table of Contents)
Maturity, as its name suggests, is the date on which the final payment for the financial instrument like a bond, etc. happens and there is no more payment which a borrower has to pay afterward. So basically all the interest and principal amount is paid in full at maturity and the contact seizes to exist. For most of the securities like loan and bonds , the maturity value is the same as the per value but different financial instruments have a different definition of maturity value. For example Maturity for a swap transaction is basically the date of final cash settlement. For commodity transaction, maturity is when the physical delivery of the commodity happens, etc. So the amount which the investor gets at the maturity date is known as maturity value. Maturity value also depends upon what type of interest an investor is getting on the investment. Maturity value in case of simple interest will be different than the maturity value for compound interest .
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Like explained above, different financial instruments have a different interpretation of maturity value.
In case of a bond which pays periodic coupon payments, the maturity value is basically the par value of the bond.
Let’s take an example to understand the calculation of Maturity Value formula in a better manner.
Let say you have invested a sum of $10,000 in a Bank for 5 years and a bank is offering you 10% simple interest and 7.5% compound interest per year on this investment. You want to calculate the maturity value of this investment.
Maturity Value is calculated using the formula given below
Maturity Value is calculated using the formula given below
Continuing the above example, you have $10,000 to invest for 5 years and now you have arranged a quotation from 3 different financial institutions:
Now you want to compare the maturity value of these investment proposals and then want to choose one among these three options. So:
Institution 1: 9% Interest Compounded Semi-Annually
Maturity Value is calculated using the formula given below
Institution 2: 8.8% Interest Compounded Quarterly
Maturity Value is calculated using the formula given below
Institution 3: 9% Interest Compounded Monthly
Maturity Value is calculated using the formula given below
So out of these three options, if you see, Institution 3 has the highest maturity value.
As explained above, maturity value is the value which an investor will get at the expiration of the contract. Investors, before investing their money can follow the following steps to determine the maturity value of the investment and then can compare different options to make the best decision:
Like discussed earlier, the nature of the financial instrument also affec
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