What are Retirement of Bonds?
Retirement of bonds is the process of a business repaying the amount of the bond to the investors. Retirement of bonds normally happens when the bond reaches its maturity date, but can happen at an earlier date if the terms of the bond permit. A premium or a discount may arise on the early retirement of bonds.
For example, a business may issue a 5 year bond on which it will pay interest to the investor. At the end of the 5 year period on the maturity date, the business will need to pay the investor the market price for the bond. After the repayment the bond is retired and no longer exists. If the bond terms stipulated that the business can buy back the bonds at any time (usually at a premium), then the bond can be retired early.
For further information on bonds payable see our bonds payable tutorials
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