Final answer:
To calculate a bond's present value, one must discount the future cash flows (interest and principal payments) at an appropriate discount rate. An increase in interest rates results in a lower present value. The bond's valuation requires information about cash flows and the discount rate, which reflects the opportunity cost of capital.
Step-by-step explanation:
To calculate the number of years until maturity for bonds paying semiannual coupons, we first need the actual maturity date of the bond, which is not provided in the question. However, we can still discuss how to calculate a bond's present value. Let's consider the example of a simple two-year bond with an issued value of $3,000 and an interest rate of 8%. Each year, it pays $240 in interest (calculated as $3,000 × 8%). The bond's worth at present if the discount rate is also 8% is the sum of the present values of these future cash flows.
If the discount rate rises to 11%, the present value of these cash flows will decrease as a higher rate is used to discount them. For instance, risk considerations will cause bonds to be discounted more if prevailing interest rates in the economy rise, such as increasing to 12%, making the current interest payments less valuable. This is because investors will require a higher yield to be induced to invest in a bond with a lower interest rate than what is currently available in the market.