Firm A and Firm B enter into a five-year currency swap. Firm A sends B $10,000,000, and in return receives ¥1,200,000,000 from Firm B. Firm A must pay 3% on the yen (to Firm B) while Firm B must pay Firm A 4% on the dollars.

One year later the new swap rates are 2.5% USD and 1.5% JPY. The spot rate is ¥110/$. Ignore bid/ask spreads. What is the value of this swap to Firm A and to Firm B?

 

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