A bank enters into an interest rate swap with a nonfinancial counterparty using bilateral clearing where it is paying a fixed rate of 4% and receiving LIBOR. No collateral is posted and no other transactions are outstanding between the bank and the counterparty. Which statement is TRUE? Select one: a. None of the choices b. The credit risk to the bank is lesser when the yield curve is downward sloping. c. The credit risk to the bank is greater when the yield curve is upward sloping. d. The credit risk to the bank is independent of the shape of the yield curve.

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