Green Company is a calendar-year U.S. firm with operations in several countries. At January 1, 2011, the company had issued 40,000 executive stock options permitting executives to buy 40,000 shares of stock for $25. The vesting schedule is 20% the first year, 30% the second year, and 50% the third year (graded-vesting). The fair value of the options is estimated as follows:

Vesting Date Amount Vesting Fair Value per Option

Dec 31, 2011 20% $7

Dec 31, 2012 30% $8

Dec 31, 2013 50% $12

Assuming Green uses the straight-line method, what is the compensation expense related to the options to be recorded in 2012?