When the Federal Government Makes a Direct Loan at an Interest

When the federal government makes a direct loan at an interest rate below the prevailing Treasury rate (a subsidized loan) , an expense should be recorded for which of the following amounts?

A) The difference between the face value of the loan and the present value of the estimated net cash receipts.
B) The difference between the present value of the estimated net cash receipts at the stated rate of interest and the present value of the net cash receipts at the prevailing interest rate.
C) The fair value of the loans.
D) No expense is recognized.