AMD 2011 Annual Report Download - page 72

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our
investment portfolio and long-term debt. We usually invest our cash in investments with short maturities or with
frequent interest reset terms. Accordingly, our interest income fluctuates with short-term market conditions. As
of December 31, 2011, our investment portfolio consisted primarily of time deposits, money market funds,
commercial paper, ARS, and corporate bonds. With the exception of our ARS, these investments were highly
liquid. Due to the relatively short, weighted-average maturity of our investment portfolio and the current low
interest rate environment, our exposure to interest rate risk is minimal.
As of December 31, 2011, all of our outstanding debt has fixed interest rates. Consequently, our exposure to
market risk for changes in interest rates on reported interest expense and corresponding cash flows is minimal.
We will continue to monitor our exposure to interest rate risk.
Default Risk. We mitigate default risk in our investment portfolio by investing in only high credit quality
securities and by constantly positioning our portfolio to respond appropriately to a significant reduction in a
credit rating of any investment issuer or guarantor. Our portfolio includes investments in debt and marketable
equity securities with active secondary or resale markets to ensure portfolio liquidity. We are averse to principal
loss and strive to preserve our invested funds by limiting default risk and market risk.
We actively monitor market conditions and developments specific to the securities and security classes in
which we invest. We believe that we take a conservative approach to investing our funds in that we invest only in
highly-rated debt securities with relatively short maturities and do not invest in securities we believe involve a
higher degree of risk. As of December 31, 2011, substantially all of our investments in debt securities were A
rated by at least one of the rating agencies. While we believe we take prudent measures to mitigate investment
related risks, such risks cannot be fully eliminated as there are circumstances outside of our control. We believe
the current credit market difficulties do not have a material impact on our financial position. However, a future
degradation in credit market conditions could have a material adverse effect on our financial position.
As a result of the uncertainties in the credit markets, all of our ARS were negatively affected and auctions
for these securities failed to settle on their respective settlement dates since February 2008. As of December 31,
2011, we had approximately $38 million of investments in ARS. See “Part II, Item 7—Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in this report for further information.
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