1. Suppose you purchase a 8-year AAA-rated Swiss bond for par that is paying an annual coupon of 10 percent. The bond has a face value of 1000 Swiss francs (SF). The spot rate at the time of purchase is SF1.35/$1. At the end of the year, the bond is downgraded to AA and the yield increases to 12 percent. In addition, the SF depreciates to SF1.45/$1.

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

   	A.	-6.08%
   	B.	9.22%
   	C.	-12.02%
   	D.	5.55%