Babs Company has $1,000,000 in 2.8% fixed-rate debt, with interest due on December 31 of each year. On January 1 it swaps its fixed interest payments for variable payments at the Treasury bill rate plus 0.7%. The current Treasury bill rate is 1.9%. The swap qualifies as a fair value hedge of the fixed payments. The company's accounting year ends December 31 , and all income effects of the loan and the swap are reported in interest expense. On December 31 , the Treasury bill rate has increased to 2.2%, increasing the variable payments on the swap for the following year. The swap value and the loan value each change by $80,000. The company's net cash flow on the swap for current year is. 2k out flow; 2k inflow; 28k inflow; 26k outflow.