17. [Interest rate sensitivity] Wal-Mart [WMT] is the largest re- tailer in the world Its annual report for the year ended January 31. 2000 contains the following information about its debt Amounts in Smillions 1-31-99 1-31-00 Long-term, fixed-rate debt $7.808 $15.636 Pair value of long-term debt 8.323 14.992 Average interest rate 7.2% 6.9%

a. Describe the inference about the change in interest rates dur- ing fiscal 2000 that you can draw from the comparison be- tween the book value and fair (market) value of Wal-Mart debt at the two balance sheet dates.

b. Wal-Mart doubled its long-term debt during fiscal 2000 but reduced the average interest rate. Explain how this was possi- ble given your answer to part a