We have prepared the maturity value calculator to help you calculate the final value of your investment at the end of the investment period. The maturity value lets you understand how much money you will make at the end of the investment. Please check out our investment calculator to understand more about this topic.
We have written this article to help you understand the maturity value definition and how to calculate the maturity value. We will also demonstrate some examples of maturity value to help you to understand what the maturity value is.
What is maturity value? Maturity value definition
The maturity value is the amount of money that you will receive at the end of the investment horizon. The maturity value is affected by three inputs, i.e., principal, interest rate, and time of investment.
In general, the higher the principal and interest rate, the higher the maturity value of your investment. Also, the longer the time of investment, the higher the maturity value of your investment. This is because a longer investment horizon gives more time for your money to grow.
How to calculate maturity value?
To understand more about how to find maturity value, let's take Investment A below as an example:
- Principal: $2,000
- Interest rate: 3%
- Time of investment: 2 years
We can find the maturity value of an investment in four steps:
Determine the principal of the investment
The first step is to determine the
principalof the investment. For our example, the
Calculate the interest rate of the investment
The next step is to compute the interest rate that applies to the investment. In our example, the
interest rateof Investment A is
If it is a bond investment, the interest rate is usually its yield to maturity (YTM). You can use our bond yield calculator, yield to maturity calculator, and bond YTM calculator to understand more about this topic.
Determine the time of investment
Now, we need to know how long we have until the investment expires. The
timeof investment for Investment A is
Calculate the maturity value
The last step is to calculate the maturity value of Investment A using the formula below:
maturity value = principal x (1 + interest rate) ^ time
Hence, Investment A's
$2,000 x (1 + 3%) ^ 2 = $2,121.80.
Can the maturity value be negative?
No, the maturity value can never be negative. This is because the maturity value is a monetary value, and it is impossible to have a negative monetary value.
How do I find the maturity value?
You can find the maturity value of an investment in four steps:
Determine the principal of the investment.
Calculate the interest rate of the investment.
Determine the time of investment.
Apply the maturity value formula:
maturity value = principal x (1 + interest rate) ^ time.
What is the maturity value of a $1,000 1-year investment at 5% interest rate?
The maturity value of the investment will be
$1,050. You can calculate this using the maturity formula:
maturity value = principal × (1 + interest rate) ^ time.
What is interest rate in a bond investment?
The interest rate of a bond investment is usually called the yield to maturity (YTM). It represents the annual rate of return of your bond investments.