Sonia is based in the U.S. and she would like to invest in an Australian corporation to diversify her portfolio. Currently the Australian corporation is issuing two bonds in the U.S. market:

Bond ABC denominated in USD

Bond XYZ denominated in AUD

A. Please describe the types of Bonds ABC and XYZ.

[2 Marks]

B.Sonia finds that the USD/AUD exchange rate has been quite volatile over the past six months. Sonia is concerned about the exchange rate volatility, which bond is best for her and please explain your answer.

[3 marks]