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Current maturity is a financial term that is used to indicate the amount of time remaining between the current date and the date in which an investment will reach full maturity. The term is often used when referring to the status of bond issues, providing investors with some understanding of how close the bonds are to reaching full maturity and settlement. One of the more important aspects of assessing the current maturity is that it helps in determining the valuation of a bond, something that is particularly important if an investor is considering the purchase of an issue that has already been held by another investor for some time.
In most instances, the current maturity is presented in terms of years. To identify the amount of time remaining until full maturity, it is necessary to subtract the current year from the year in which the bond will mature. The resulting figure will identify the remaining number of years that must pass before the bond is settled, assuming that the bond is not called early by the issuer.
Since the current maturity has to do with how much time remains until the bond will be settled by the issuer, identifying this time frame is very important for any investor who wants to buy or sell that issue. For the seller, there is a need to assess what the current value of the bond happens to be, based on how much interest has accrued and not yet been paid as of the proposed date of the sale. In addition, the seller will want to consider what type of additional interest would be accrued if he or she chose to hang on to the bond all the way to maturity. The two figures aid in setting a price range for the bond issue and allowing the seller to receive as much of a return from the investment as possible without continuing to hold the bond.
For buyers, identifying the current maturity is also very important. This is because knowing how much time remains until the bond matures provides the means of projecting what type of interest will accrue from the date of the purchase until the bond is settled with the issuer. Knowing this figure makes it easier to decide if the asking price extended by the seller is equitable and will still allow the buyer to make some sort of return from the investment, or if the asking price would effectively offset any type of profits that could be made between now and the final maturity date.
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