At initiation, the present value of a swap is typically zero for both counterparties. As time passes, the value of a swap changes mostly due to:

a.Implementation of more advanced swap valuation models

b.Forward rates that were used to initially price the swap change

c.The credit risk of each counterparty is perceived to have changed

d.Collateral exchanged or received during the clearing process

One year ago, a risk manager entered a $50 million 5-year interest rate swap as the fixed rate payer. The fixed rate was 2.875%.4-year interest rates are now 3.675% and the swap has an estimated modified duration of 3.65. The fair value of the swap from the risk manager's perspective is closest to:

a.Loss of $1,825,000

b.Gain of $1,460,000

c.Loss of $1,437,500

d.Gain of $1,875,000