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What happens to the interest payments when a bond reaches its maturity date?

Curious about Maturity date

What happens to the interest payments when a bond reaches its maturity date?

When a bond reaches its maturity date, the issuer is typically obligated to repay the bondholder the face value of the bond. At this point, the principal amount of the bond is returned to the bondholder. However, it's important to note that the interest payments (also known as coupon payments) associated with the bond are typically made periodically throughout the life of the bond, up until its maturity.

The interest payments are usually fixed and predetermined based on the bond's coupon rate and face value. These payments are made to compensate the bondholder for lending their money to the issuer over the bond's term. The frequency of interest payments can vary, such as annual, semiannual, quarterly, or even monthly, depending on the terms of the bond.

Once the bond reaches its maturity date, the final interest payment is usually made along with the repayment of the principal. After this point, the bond no longer generates any interest payments since the bondholder has received the full contractual amount due.

It's important to note that some bonds may have different structures or features that deviate from the typical pattern. For example, certain types of bonds, such as zerocoupon bonds, do not make periodic interest payments but are instead issued at a discount to the face value and provide a return through the appreciation in value over time. Additionally, callable or redeemable bonds may have different provisions that allow the issuer to retire the bond before its stated maturity date, potentially impacting the timing of interest payments.

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