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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our financial position is exposed to a variety of risks, including interest rate risk, equity price risk, and foreign
currency exchange risk.
Interest Rate Risk
Fixed Income Securities
We maintain an investment portfolio of various holdings, types, and maturities. Our primary objective for
holding fixed income securities is to achieve an appropriate investment return consistent with preserving
principal and managing risk. At any time, a sharp rise in market interest rates 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 for our
investment portfolio. We may utilize derivative instruments designated as hedging instruments to achieve our
investment objectives. We had no outstanding hedging instruments for our fixed income securities as of July 30,
2011. Our fixed income investments are held for purposes other than trading. Our fixed income investments are
not leveraged as of July 30, 2011. See Note 8 to the Consolidated Financial Statements. We monitor our interest
rate and credit risks, including our credit exposures to specific rating categories and to individual issuers. As of
July 30, 2011, approximately 75% of our fixed income securities balance consists of U.S. government and U.S.
government agency securities. We believe the overall credit quality of our portfolio is strong.
The following tables present the hypothetical fair values of our fixed income securities, including the hedging
effects when applicable, as a result of selected potential market decreases and increases in interest rates. The
market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points
(“BPS”), plus 100 BPS, and plus 150 BPS. Due to the low interest rate environment at the end of each of fiscal
2010 and fiscal 2009, we did not believe a parallel shift of minus 100 BPS or minus 150 BPS was relevant. The
hypothetical fair values as of July 30, 2011 and July 31, 2010 are as follows (in millions):
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS
FAIR VALUE
AS OF
JULY 30,
2011
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 ........ N/A N/A $35,740 $35,562 $35,384 $35,206 $35,029
VALUATION OF SECURITIES
GIVEN AN INTEREST RATE
DECREASE OF X BASIS POINTS
FAIR VALUE
AS OF
JULY 31,
2010
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 ........ N/A N/A $34,187 $34,029 $33,870 $33,712 $33,553
There were no impairment charges on our investments in fixed income securities for fiscal 2011 or 2010. For
fiscal 2009 we had impairment charges of $219 million on investments in fixed income securities.
Debt
As of July 30, 2011, we had $16.0 billion in principal amount of senior notes outstanding, which consisted of
$1.25 billion floating-rate notes and $14.75 billion fixed-rate notes. The carrying amount of the senior notes was
$16.2 billion, and the related fair value was $17.4 billion, which fair value is based on market prices. As of
July 30, 2011, a hypothetical 50 BPS increase or decrease in market interest rates would change the fair value of
the fixed-rate debt, excluding the $4.25 billion of hedged debt, by a decrease or increase of $0.5 billion,
respectively. However, this hypothetical change in interest rates would not impact the interest expense on the
fixed-rate debt, which is not hedged.
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