A company obtains a $1,000,000 variable rate loan on January 1, 2021, at a 2.1% interest rate. The loan is renewable every 3 months, and the interest rate is reset at each renewal. The company hedges against rising interest rates by taking a short futures position in $1,000,000 of 3-month Treasury bills at 99. There is no margin deposit, and the hedge qualifies as a fair value hedge of a firm liability commitment. At the end of 3 months, the Treasury bills sell for 98.2 and the loan renews at 2.9%. The company closes the futures contract and renews the loan. All income effects of the loan and the futures are reported in interest expense. At what amount will interest expense be reported for the new loan?

Select one:

A. $29,000

B. $ 9,250

C. $ 7,250

D. $ 5,250

Please Show Work