1. The difference between the value of a government bond and a similar corporate bond is equal to the value of an option. What is this option, and what is its exercise price? 2. Other things equal, would you expect the difference between the price of a Treasury bond and a corporate bond to increase or decrease with (a) The company's business risk? (b) The degree of leverage? (c) The time to maturity? 3. Firm X's assets are worth $100. It has $80 of zero-coupon debt outstanding that is due to be repaid at the end of two years. The risk-free rate is 5%, and the standard deviation of the returns on firm X's assets is 40% per year. Calculate the present value of the company's deb and equity