Suppose you purchase a 10-year AAA-rated British bond for par that is paying an annual coupon of 9 percent and has a face value of 1,000 British Pounds (). The spot rate is US$1.105 for . At the end of the year, the bond is downgraded to AA and the yield increases to 11 percent. In addition, the new spot rate becomes US$0.985 for . What is the loss or gain to a U.S. investor who holds this bond for a year?

Multiple Choice

15.32% loss

11.28% loss

8.71% loss

12.71% loss

10.14% loss