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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 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.

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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 ...

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