Assume that an operational process has a 5% probability of creating a material loss and, otherwise, no material loss is experienced. If the material loss occurs, the severity is normally distributed with a mean of $4 million and standard deviation of $2 million. What is the 95% expected shortfall?

1. $0.71 million
2. $3.29 million
3. $4.00 million
4. $7.29 million