Panther Company does not want to bear the risk that interest rates may increase in year two of the loan. Aegean Company believes that rates may decrease and they would prefer to have variable debt. So the two companies enter into an interest rate swap agreement whereby Aegean agrees to make Panther's interest payment in 2015 and Panther likewise agrees to make Aegean's interest payment in 2015
The two companies agree to make settlement payments, for the difference only, on December 31 . 2015 . If the interest rate on December 31 . 2014 is 1 . percent, what amount will Panther report as the fair value of the interest rate swap at December 31 . 2014 (answers rounded to the nearest dollar)?
a. $0
b. $10,715
c. $12,000
d. $600,000
B
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