In an interest rate swap,the party who is the fixed-rate payer:
A) currently has fixed-rate obligations, but prefers floating.
B) currently has floating-rate obligations, but prefers fixed.
C) receives a fixed-rate payment if interest rates increase.
D) pays a floating-rate payment if interest rates increase.

Question

Quizplus · Accepted Answer

The fixed-rate payer in an interest rate swap is the party who currently has floating-rate obligations but prefers fixed-rate obligations. This party agrees to make fixed-rate payments to the other party in exchange for receiving floating-rate payments. By doing so, they are protecting themselves against the risk of rising interest rates, which would result in higher debt payments.

In an Interest Rate Swap,the Party Who Is the Fixed-Rate