On January 1, 2017, Sandro Corporation issued $500,000 of its 8% bonds for $467,479. The bonds were priced to yield 9%. The bonds are dated January 1, 2017, and mature on December 31, 2026. Interest is payable semiannually on June 30 and December 31. Sandro Corp. determines interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2017, the fair value of the bonds was $475,000 as determined by their market value in the over-the-counter market. Sandro determined that $2,000 of the increase in fair value was due to a decline in general interest rates. Sandro earnings for the year will include:

a. A loss from change in the fair value of debt of $2,000 b. A loss from change in the fair value of debt of $3,595 c. A gain from change in the fair value of debt of $2,599