On January 1, 2016, Xander Insurance Company granted 36,790 stock options to certain executives. The options are exercisable no sooner than December 31, 2019, and expire on January 1, 2020. Each option can be exercised to acquire one share of $1 par common stock for $10. An option-pricing model estimates the fair value of the options to be $7 on the date of grant. The market price of Xander's stock was as follows: January 1, 2016 December 31, 2016 $12 15 What amount should Xander recognize as compensation expense for 2016?