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 u.s rate is 2.5% per annum (both with continuous compounding) A U.S firm has entered into a currency swap in which it receive 3% per annum both with continuous compounding). A U.S firm has entered into a currency swap in which it receives 3% per annum in yen and pays 4% per annum in dollars once a year. The principals in the tow 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 = $1 (1/108)