Final Maturity Date

What It Is:

A final maturity date is the date upon which all principal and interest must be repaid.

How It Works/Example:

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 It Matters:

The repayment schedule differs from one interest-bearing instrument to another, but the final maturity date  universally demands repayment of both principal and interest.