Future Business Leaders of America (FBLA) Securities and Investments Practice Test

What is the maturity date of a security?

1. The date when the principal amount of the security is due

2. The date when interest payments begin

3. The date when a company goes public

4. The date when stock options are exercised

The correct answer is: The date when the principal amount of the security is due

The maturity date of a security refers specifically to the date when the principal amount is due to be repaid to the investor. This is particularly relevant for fixed-income securities, such as bonds, where the investor expects to receive their initial investment back at the maturity date, in addition to any interest payments made during the life of the security. Understanding this concept is essential for investors, as it helps them align their financial strategies with their investment timeline and cash flow needs. The other choices either refer to aspects of securities that are not directly related to the repayment of principal or involve different financial events altogether. For instance, interest payments beginning and the exercise date of stock options pertain to different operational aspects of securities that do not define when the principal amount becomes due. Additionally, the date a company goes public (the initial public offering or IPO date) is associated with equity securities and the company's transition to being publicly traded, which does not have a straightforward connection to the concept of maturity.