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2008 Annual Report 43
Quantitative and Qualitative Disclosures About Market Risk
Investments
We maintain an investment portfolio of various holdings, types, and maturities. See Note 7 to the Consolidated Financial Statements. As of
July 26, 2008, these securities are classified as available-for-sale and consequently are recorded in the Consolidated Balance Sheets at
fair value with unrealized gains or losses, to the extent unhedged, reported as a separate component of accumulated other comprehensive
income, net of tax.
We consider various factors in determining whether we should recognize an impairment charge for our fixed income securities and
equity securities, including the length of time and extent to which the fair value has been less than our cost basis, the financial condition
and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any
anticipated recovery in market value.
Fixed Income Securities
At any time, a sharp rise in interest rates or credit spreads could have a material adverse impact on the fair value of our fixed income
investment portfolio. Conversely, declines in interest rates, including the impact from lower credit spreads, could have a material adverse
impact on interest income from our investment portfolio. Our fixed income instruments are not leveraged as of July 26, 2008 and are held
for purposes other than trading. We monitor our interest rate and credit risks, including our credit exposures to specific rating categories
and to individual issuers. There were no impairment charges on our investments in fixed income securities in fiscal 2008, 2007, or 2006.
The following tables present the hypothetical fair values of fixed income securities, including the effects of the interest rate swaps
discussed further under “Interest Rate Derivatives” below, as a result of selected potential market decreases and increases in interest rates.
Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (“BPS”), 100 BPS, and
150 BPS. The hypothetical fair values as of July 26, 2008 and July 28, 2007 are as follows (in millions):
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS
FAIR VALUE
AS OF
JULY 26,
2008
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
INCREASE OF X BASIS POINTS
(150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
Fixed income securities $ 20,216 $ 20,100 $ 19,985 $ 19,869 $ 19,753 $ 19,638 $ 19,522
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS
FAIR VALUE
AS OF
JULY 28,
2007
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
INCREASE OF X BASIS POINTS
(150 BPS) (100 BPS) (50 BPS) 50 BPS 100 BPS 150 BPS
Fixed income securities $ 17,673 $ 17,548 $ 17,422 $ 17,297 $ 17,172 $ 17,046 $ 16,921
Publicly Traded Equity Securities
The values of our equity investments in several publicly traded companies are subject to market price volatility. The following tables
present the hypothetical fair values of publicly traded equity securities as a result of selected potential decreases and increases in the
price of each equity security in the portfolio, excluding hedged equity securities. Potential fluctuations in the price of each equity security
in the portfolio of plus or minus 10%, 20%, and 30% were selected based on potential near-term changes in those security prices. The
hypothetical fair values as of July 26, 2008 and July 28, 2007 are as follows (in millions):
VALUATION OF SECURITIES
GIVEN AN X% DECREASE IN
EACH STOCK’S PRICE
FAIR VALUE
AS OF
JULY 26,
2008
VALUATION OF SECURITIES
GIVEN AN X% INCREASE IN
EACH STOCK’S PRICE
(30%) (20%) (10%) 10% 20% 30%
Publicly traded equity securities $ 736 $ 842 $ 947 $ 1,052 $ 1,157 $ 1,262 $ 1,368
VALUATION OF SECURITIES
GIVEN AN X% DECREASE IN
EACH STOCK’S PRICE
FAIR VALUE
AS OF
JULY 28,
2007
VALUATION OF SECURITIES
GIVEN AN X% INCREASE IN
EACH STOCK’S PRICE
(30%) (20%) (10%) 10% 20% 30%
Publicly traded equity securities $ 548 $ 626 $ 705 $ 783 $ 861 $ 940 $ 1,018
Our equity portfolio consists of securities with characteristics that most closely match the Standard & Poor’s 500 Index or NASDAQ
Composite Index. These equity securities are held for purposes other than trading. There were no impairment charges on publicly traded
equity securities in fiscal 2008, 2007, or 2006.