The reasons why bonds rarely sell for their maturity value are:
- The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a result, the amount of interest paid each year does not change during the life of the bond.
- The market interest rate—the rate that bond buyers demand—is changing daily.
To illustrate, let's assume that a 6% bond will mature in ten years and has a maturity value of $100,000. This means that the bondholders will be receiving $6,000 in interest in each of the ten years. If there is a day when the bond buyers demand an interest rate of 6.2% then the bond's value on that day will be less than $100,000. If on another day the bond buyers demand 5.9% interest, the bond's value on that day will be greater than $100,000.