Refer to Note 20, Financial Instruments.h.iWhat is the fair-value of Rite Aid's fixed-rate debt at February 28, 2004? Why does it differfrom the carrying amount?What is the fair-value of the variable-rate debt at February 28, 2004? Why does it not differfrom its carrying amount?iiiiiWhy would financial statement users want to know the fair-value of Rite Aid's debt? 20. Financial InstrumentsThe carrying amounts and fair values of financial instruments at February 28, 2004 and March 1,2003 are listed as follows:20032004FairValueCarryingAmountFairValueCarryingAmount\$1,150,000 \$1,150,000 \$1,372,500 \$1,372,500\$2,558,497 \$2,640,995 \$2,313,942 \$2,027,603Variable rate indebtednessFixed rate indebtedness .Cash, trade receivables and trade payables are carried at market value, which approximates theirfair values due to the short-term maturity of these instrumentsThe following methods and assumptions were used in estimating fair value disclosures forfinancial instruments:LIBOR-based borrowings under credit facilities:The carrying amounts for LIBOR-based borrowings under the credit facilities, term loans andterm notes approximate their fair values due to the short-term nature of the obligations and thevariable interest ratesLong-term indebtedness:The fair values of long-term indebtedness is estimated based on the quoted market prices of thefinancial instruments. If quoted market prices were not available, the Company estimated the fairvalue based on the quoted market price of a financial instrument with similar characteristics

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Step 1

i)

The fair value of the fixed rate debt at February 28, 2004 is \$2,640,995, as since this represents quoted market value of the financial instruments which are similar unlike the carrying amount.

Step 2

ii)

The fair value of the variable rate debt at February 28, 2004 is \$1,150,000, and this is different from the carrying amount due to the various changes ...

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