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:

1. Implementation of more advanced swap valuation models
2. Forward rates that were used to initially price the swap change
3. The credit risk of each counterparty is perceived to have changed
4. Collateral exchanged or received during the clearing process

Assuming inflation is 2%, a nominal bond yielding 3% is more valuable than an inflation-linked bond yielding 1%.

5. True
6. False