Prime Medicine, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We are exposed to market risk related to changes in interest rates of our investment portfolio of cash equivalents and short-term investments. As of December 31, 2022, we held cash and cash equivalents, short-term investments, and related party short-term investments of $293.9 million, excluding restricted cash, which consisted of cash, money market funds, equity securities and U.S. Treasuries, or $307.4 million, including restricted cash. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. The fair value of our cash equivalents, comprised of our money market funds, and U.S. Treasuries are subject to change as a result of potential changes in market interest rates, including changes resulting from the impact of the COVID-19 pandemic. Due to the short-term maturities of our cash equivalents and U.S. Treasuries and the low risk profile of our investments, an immediate 10 percent change in interest rates would not have a material effect on the fair market value of our cash equivalents or U.S. Treasuries. 182 As of December 31, 2022, we had no debt outstanding and are therefore not exposed to interest rate risk with respect to debt. Effects of Inflation Inflation generally affects us by increasing our cost of labor and research and development costs. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to an impact on the costs to conduct research and development, labor costs we incur to attract and retain qualified personnel, and other operational costs. Inflationary costs could adversely affect our business, financial condition and results of operations.