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The term structure of risk-free interest rates is flat in both Japan and the United States. The Japanese rate is 1.5. per annum and the US rate is 2.5% per annum (both with continuous compounding A US firm has entered into a currency swap in which it recentes 39. per annum in yen and pays 4. per annum in dollars once a year. The principals in the two currencies are $10 million and 1.200 million yen. The swap will last for another two years, and the current exchange rate is 108 yen-S1 (S0 = 1/108). The term structure of risk-free interest rates is flat in both Japan and the United States. The Japanese rate is 1.5. per annum and the US rate is 2.5% per annum (both with continuous compounding A US firm has entered into a currency swap in which it recentes 39. per annum in yen and pays 4. per annum in dollars once a year. The principals in the two currencies are $10 million and 1.200 million yen. The swap will last for another two years, and the current exchange rate is 108 yen-S1 (S0 = 1/108)