Question: PROBLEM 5 . Assume that the risk - free rates today for USD and Yen are 5 % and 1 0 % respectively for all

PROBLEM 5. Assume that the risk-free rates today for USD and Yen are 5% and 10% respectively for all maturities (annual, continuously compounded). Some time ago, a financial institution entered into a currency swap where it receives 6% per year in Yen and pays 9% in USD each year. The principal amounts are 15 million USD and 1500 million Yen. The swap matures in three years, and the exchange rate today is 120 Yen per 1 dollar. Calculate the value of the swap for the financial institution.

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