Suppose you purchase a $20-$year, AAA$-$rated Swiss bond for par that is paying an annual coupon of $6\mathrm{.}259\%.$ The bond has a face value of $1,000$ Swiss francs $($SF$).$ The spot rate at the time of purchase

is SF$0\mathrm{.}97/$S$.$ At the end of the year, the bond is downgraded to AA and the yield increases to $7\mathrm{.}75\%.$ In addition, the SF appreciates to SF$0\mathrm{.}91/$S$.$

$(1)$ What is the loss or gain to a Swiss investor who holds this bond for a year? What portion of this loss or gain is due to foreign exchange risk? What portion is due to interest rate risk? $(5$ points$)$

$(2)$ What is the loss or gain to a U$.$S$.$ investor who holds this bond for a year? What portion of this loss or gain is due to foreign exchange risk? What portion is due to interest rate risk? $(5$ points$)$