Fixed Rate Payment in a Swap

A swap is a financial derivative that allows two parties to exchange cash flows or liabilities from two different financial instruments. The most common type of swap is an interest rate swap, where one party pays a fixed interest rate and receives a floating interest rate, or vice versa. Understanding how swaps are priced and valued is crucial in finance.

Consider a plain vanilla interest rate swap with a notional principal of $1,000,000. One party pays a fixed rate of 5% annually, while the other party pays a floating rate tied to LIBOR. If LIBOR is currently at 4%, which of the following statements is true regarding the fixed rate payment in this swap?