2008 Exam Question 7C "compound annual interest rates"

Looking at this “who bears credit risk in a a forward” question. I understand that there is no discounting for the F and S prices for this particular case, however, I am wondering, if there was discounting, what does this mean :

"Compound annual interest rates for the two-year period: 1 percent in JPY and 10 percent in ZAR."

Does it mean you wouldn’t raise 1.01 and 1.10 to the power of 2? My understanding is these are still annual rates, so to discount it back by 2 years, you would raise to 2: 1/(1.01^2) and 1/(1.10^2)

Thanks for any clarification!

I just answered 2008, avoid that since it is not part of the LOS and the reference book is different from the current.

Thanks Lion! Been really spinning my wheels…