Ms. Joan Hanson is an employee of a CCPC. During 2021,she is granted options to purchase 500 shares of her employer's common stock at a price of $22 per share. At this time, the FMV of the shares are estimated to be $20.50. During 2022, she exercises all of the options purchasing 500 shares. At this time, the estimated FMV of the shares are $31.50 per share. On December 1, 2022, she sells the shares for $38.75 per share. The net effect of the transactions on her 2022 taxable income would be:

an increase of $4,750.00.

an increase of $4,187.50.

an increase of $1,812.50.

an increase of $2,375.00.

an increase of $6,562.50.