Item 7A. Quantitative and Qualitative Disclosures about Market Risk

All information in this section applies to Host Inc. and Host L.P.

Interest Rate Sensitivity

Our future income, cash flows and fair values with respect to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We have no derivative financial instruments that are held for trading purposes. We use derivative financial instruments to manage, or hedge, interest rate risks.

The interest payments on 70% of our debt are fixed in nature. Valuations for mortgage debt and the credit facility are determined based on expected future payments, discounted at risk-adjusted rates. The senior notes are valued based on quoted market prices. If market rates of interest on our variable rate debt increase or decrease by 100 basis points, interest expense would increase or decrease, respectively, our future earnings and cash flows by approximately $12 million in 2018. The table below presents scheduled maturities and related weighted average interest rates by expected maturity dates (in millions, except percentages):

Exchange Rate Sensitivity

We have currency exchange risk as a result of our hotel ownership in Brazil, Canada and Mexico and our investment in the European and Asia/Pacific joint ventures. We utilize several strategies to mitigate the exposure of currency exchange risk for our portfolio, including (i) utilizing local currency denominated debt (including foreign currency draws on our credit facility), (ii) entering into forward or option foreign currency purchase contracts, and (iii) investing through partnership and joint venture structures. For 2017 and 2016, revenues from our consolidated foreign operations were $127 million and $171 million, or 2% and 3%, respectively, of our total revenues. Over the past few years, we have strategically exited international markets, including the disposition of one hotel in Australia in 2017 and six international properties in 2016. As a result, we have reduced our foreign currency exchange risk so that there now is minimal impact on our results of operations.

The foreign currency exchange agreements into which we have entered strictly are to hedge foreign currency risk and are not for trading purposes. During 2017, in connection with the maturity of a foreign currency forward purchase contract with a total notional amount of €15 million, for which we received total proceeds of approximately $4 million, we entered into a new foreign currency forward purchase contract with the same notional amount. We also made payments totaling approximately $2 million to settle forward currency hedges with a total notional amount of NZ$45 million and €55 million. The gain or loss related to the matured contracts is initially included in accumulated other comprehensive income and is recognized in earnings when the hedged investment has been repatriated.

As of December 31, 2017, we have three foreign currency forward sale contracts in the aggregate notional amount of $70 million that hedge a portion of the foreign currency exposure resulting from the eventual repatriation of our Canadian dollar and euro net investments in foreign operations. These derivatives are considered hedges of the foreign currency exposure of a net investment in a foreign operation. The contracts are required to be measured at fair value on a recurring basis using significant other observable inputs. As a result, we recorded a liability of $5 million and an asset of $12 million as of December 31, 2017 and 2016, respectively, related to these foreign currency forward sale contracts. These contracts are marked-to-market with changes in fair value recorded to

other comprehensive income (loss). We recorded a loss of $14 million and a gain of $6 million for the years ended December 31, 2017 and 2016, respectively. The foreign currency forward sale contracts are valued based on the forward yield curve of the foreign currency to U.S. dollar forward exchange rate on the date of measurement. Pursuant to these contracts, we will sell the foreign currency amount, as applicable, and receive the U.S. dollar amount on the forward sale date. We also evaluate counterparty credit risk when we calculate the fair value of the derivatives. In addition to the foreign currency forward sale contracts, we have designated $129 million of the foreign currency draws on our credit facility as hedges of net investments in foreign operations. Changes in fair value of the designated credit facility draws are recorded to other comprehensive income (loss). We recorded a loss of $14 million and a gain of $2 million for the years ended December 31, 2017 and 2016, respectively.