1. A corporation issues $18,000,000 of 6% bonds to yield an effective interest rate of 7%.

a) was the amount of cash received from the sale of the bonds more or less than $18,000,000?
b) identify the following amounts related to the bond issue: 1) face amount, 2) market rate of interest, 3)contract rate of interest, and 4) maturity amount.

The ______ interest rate is used to calculate the regular interest payments made to the bond holder.

To determine the answers to these questions, we need to understand the key concepts related to bond issuance.

1) Face amount: The face amount, also known as par value or principal, is the amount stated on the face of the bond. In this case, it is not provided, so we cannot determine the exact face amount.

2) Market rate of interest: The market rate of interest is the prevailing interest rate in the market at the time of bond issuance. It is determined by various factors such as the risk profile of the corporation, current economic conditions, and other market forces. In this case, the market rate of interest is not given explicitly, so we cannot determine its value.

3) Contract rate of interest: The contract rate of interest, also known as the coupon rate, is the rate at which the corporation agrees to pay interest to the bondholders. In this case, it is stated that the bonds are issued at a 6% coupon rate. Therefore, the contract rate of interest is 6%.

4) Maturity amount: The maturity amount is the face amount of the bond plus any accrued interest over the bond's life. Since we do not know the face amount, we cannot determine the exact maturity amount.

Now, let's address the specific questions:

a) Was the amount of cash received from the sale of the bonds more or less than $18,000,000?
To answer this, we need to consider whether the bonds were issued at a premium or a discount. When the contract rate of interest is higher than the market rate of interest, the bonds are issued at a premium, and the cash received is more than the face amount. Conversely, when the contract rate of interest is lower than the market rate of interest, the bonds are issued at a discount, and the cash received is less than the face amount.

Since the market rate of interest is not provided, we cannot determine whether the bonds were issued at a premium or a discount. Hence, we cannot determine if the amount of cash received was more or less than $18,000,000.

b) Identify the following amounts related to the bond issue:
1) Face amount: Not provided.
2) Market rate of interest: Not provided.
3) Contract rate of interest: The contract rate of interest is 6%.
4) Maturity amount: Not provided.

Without the specific values for the face amount, market rate of interest, and maturity amount, we cannot identify these amounts accurately.

In summary, based on the information given, we cannot determine the exact amounts requested in the questions.