Price a sustainability-linked coupon step

How much extra interest follows a missed sustainability target?

A sustainability-linked bond can change its coupon if a defined performance target is missed. Read the contract before counting cash flows.

Annual incremental interest = principal × step-up in basis points ÷ 10,000

₹200 crore × 25 ÷ 10,000 = ₹0.50 crore per affected year.

On ₹200 crore principal, a 25 basis-point step adds ₹0.50 crore per affected year. A 7.00% coupon becomes 7.25%.

₹200 crore × 25 ÷ 10,000 = ₹0.50 crore per affected year.

If the step applies to the last two annual payments, how much additional undiscounted interest is due?