|Question||A portfolio manager buys a swaption with a strike rate of 4.5% that entitles the portfolio manager to enter into an interest-rate swap to pay a fixed-rate and receives a floating rate. The term of the swaption is five years.
Answer the below questions.
(a) Is this swaption a payer swaption or a receiver swaption? Explain.
(b) What does the strike rate of 4.5% mean?