1. (8 points). Suppose that we can see that the interest rate in Japan is 2.5% and the U.S. interest rate is 4.5 percent. We also observe that the Japanese yen's forward rate has a premium of 2.2 percent. If a U.S. firm is solely interested in minimizing the cost of financing for a project in Japan, should the firm finance in U.S. dollars or Japanese yen? Explain your response