Anyone understand the rationale behind these:
-Hedged expected DC return on foreign bond should be FC interest rate + expected currency appreciation. --Unhedged expected DC return on foreign bond should be FC interest rate + FCRP. Can you explain? Thanks
Hedging return on foreign bond means you cut off volatility of real interest rate of foreign bond. So what you get is FC interest rate and currency appreciation/depre (occur from expected inflation). (There is no risk here.) In case of unhedged, you might gain or loss from real interest rate change, that is real gain or loss. So expected return should be plus by FCRP* specific sensitivity of firm. 
Please comment, if I miss something