Bank One enters into a five-year swap contract with Mervin Co. to pay LIBOR in return for a fixed 8% rate on a principal of $100 million. Three years from now, the market rate on 2-year swaps at LIBOR is 7%. At this time, Mervin Co. declares bankruptcy and defaults on its swap obligation. Assume that the net payment is made only at the end of each year for the swap contract period. What is the market value of the loss incurred by Bank One as a result of the default?

Question options:

1)	$1.927 million

2)	$2.245 million

3)	$2.624 million

4)	$1.808018 million