You have one coupon bond from a Mediterranean country with a nominal value of 1 million euros. Coupon interest of 5% is paid on this bond once a year. There are 8 years left until the bond is canceled and the next coupon payment should take place tomorrow. Investors expect a yield of 8% per annum on this bond. This was the case this morning... During the day, however, it became clear that the country was in financial difficulties and therefore unable to pay the planned coupon interest for the next day and for another three years. However, as a result of the joint, swift efforts of the creditors, it is immediately agreed that the bonds will be restructured. According to the agreement, the debtor promises to transfer tomorrow's and in addition three years of unpaid coupon payments to investors upon cancellation of the bond (ie after 8 years). However, the remaining payments will be made in accordance with the initial agreement.

Find out how much you, as an investor, suffered during the day if, considering the increased level of risk, the expected return on investors' bonds has instantly risen to 16% per year.