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    Ethical implications of hiding company borrowing activities

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    What are the ethical implications of undertaking transactions expressly to temporarily hide how much money a firm has borrowed?

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    Solution Preview

    Read "I-Bonds Adjust for Inflation"

    1. The inflation-adjusted interest rate causes the I-bonds to be sold at face value. The additional interest will added to bond and paid at the time of redemption. Whereas, a regular is sold at less than face value and grows over the term of the bond.

    2. An advantage of an I-bond is that the interest rate will adjust based on inflation changes. Also, the bond will rise along with inflation. Further, the interest rate consists ...

    Solution Summary

    There are ethical implications for a company hiding borrowing from investors and the public. This solution discusses four points - the first is that the inflation-adjusted interest rate causes l-bonds to be sold at face value, the advantage of l-bonds that the interest rate will adjust based on inflation changes, deflation causing the adjustable rate portion of the l-bond to be negative, and bond price changing based on interest rate changes.