Suppose a Japanese investor purchased a US government bond with a $1-$year maturity and has decided to wait for the bond to mature before she brings the money back to Japan to use to buy a house. Which of the following illustrates the risk of this international transaction for the investor?

Select the correct answer below:

The Japanese yen may appreciate against the dollar reducing the return on the bond investment in yen.

The Japanese yen may depreciate against the dollar reducing the return on the bond investment in yen.

The Japanese investor may not get her return on investment if the bond turns junk.

none of the above