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Suppose you purchase ar 20-year, AAA-rated Swiss bond for par that is paying an annual coupon of 2.5. Swiss francs (SF). The spot rate at

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Suppose you purchase ar 20-year, AAA-rated Swiss bond for par that is paying an annual coupon of 2.5. Swiss francs (SF). The spot rate at the time of purchase is SF1.10is. At the end of the year, the bond is downgraded to AA and the yieid increases to 4.5%. In addition, the SF appreciates to SF0,98/5. (1) What is the loss or gain to a Swiss invester who holds this bond for a year? What portion of this loss or gain is due to foreign exehange risk? What portion is due to interest rate risk? (10 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 exehange risk? What portion is due to interest fate risk? (10 points) For the toblbar, prets AII+F10 (FC) of ALT+FN+FIO cMarl

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