24-5 In a conventional interest rate swap agreement,the fixed-rate payer is attempting to transform the variable-rate nature of its liabilities into fixed-rate liabilities.

Question

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This statement correctly describes the purpose of the fixed-rate payer in an interest rate swap agreement. The fixed-rate payer agrees to make fixed-rate payments to the variable-rate payer in exchange for receiving variable-rate payments from the variable-rate payer. This allows the fixed-rate payer to effectively convert their variable-rate liabilities into fixed-rate liabilities.

24-5 in a Conventional Interest Rate Swap Agreement,the Fixed-Rate Payer