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Business, 18.12.2019 19:31 josiahespinosa

Suppose you purchase a 9-year aaa-rated swiss bond for par that is paying an annual coupon of 5 percent and has a face value of 2,600 swiss francs (sf). the spot rate is u. s. $0.7 for sf1. at the end of the year, the bond is downgraded to aa and the yield increases to 7 percent. in addition, the sf depreciates to u. s. $0.74074 for sf1.

a. what is the loss or gain to a swiss investor who holds this bond for a year?

b. what is the loss or gain to a u. s. investor who holds this bond for a year?

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