Suppose you purchase a 12-year AAA-rated Swiss bond for par that is paying an annual coupon of 7 percent. The bond has a face value of 1000 Swiss francs (SF). The spot rate at the time of purchase is SF1.60/$1. At the end of the year, the bond is downgraded to AA and the yield increases to 10 percent. In addition, the SF appreciates to SF1.50/$1.

What is the loss or gain to an Australian investor who holds this bond for a year?

A. -6.65%

B. -12.69%

C. 6.22%

D. 5.93%