Your bank has a loan outstanding with a current balance of $1,000,000 that is payable in quarterly equal instalments of $49,924. This loan has another 6 years to maturity. The borrower has run into financial problems and has requested a reduction of the quarterly instalments to $40,000. The cost of money to the bank is 6% (with quarterly compounding). Estimate the loss to the bank if it agrees to restructure the loan as requested by the client.
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