1. Discuss why companies decide to issue bonds as a source of finance. (1 mark)
2. Explain why bond prices have an inverse relationship with interest rate movements. ( 1 mark)

Albert Page purchased one of Extra-large Shirt Companys bonds last year when the market interest rate on similar-risk bonds was 6 percent. When he purchased the bond, it had seven years remaining until maturity. The bonds coupon rate of interest (paid semi-annually) is 5 percent and its maturity value is $1000. Today, the market rate on similar risk bonds as the one Albert purchased one year ago is 4 percent.

3. If he were to sell the bond today, what price he can sell it for?