Suppose We Have a Zero-Coupon Bond That Pays $1 After

Suppose we have a zero-coupon bond that pays $1 after one year if the issuing firm is not in default.If the firm is in default the recovery rate is 40%.The one-year risk free interest rate in simple terms is 5% and the risk-neutral probability that the firm defaults is 10%.What is the fair credit spread on the bond (again,in simple terms) ?

A) 5.0%
B) 6.7%
C) 10.5%
D) 11.7%

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