Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended February 1, 2020, are available in Connect. This material is also available under the Investor Relations link at the company’s website (www.target.com).

Required:
1. Note 16 indicates that Target has derivative instruments consisting of interest rate swaps that are designated as fair value hedges. The total notional amount of the existing swap agreements is $1,500 million. According to the note, how is the net settlement determined under these agreements?
2. Target has designated its interest rate swaps as fair value hedges. What interest rate risk is Target concerned about?
3. Does Target have a gain or a loss on its interest rate swaps for the fiscal year ended February 1, 2020, and where in the financial statements was the gain or loss recorded? On the bond? Did earnings increase or decrease due to the hedging arrangement? Why?
4. Based on information in Note 6 and Note 15, what are the balance sheet effects of the hedging relationships described in Note 16 at February 1, 2020?