As of June of 2016, Facebook (FB) had no debt. Suppose the firm's managers consider issuing zero-coupon debt with a face value of $231 billion due in January of 2018 (19 months) and using the proceeds to pay a special dividend. FB has 2.31 billion shares outstanding, with a market price (June, 2016) of $116.62. The risk-free rate over this horizon is 0.25%.

There is a call option trading on FB with a strike price of $100 and a price of $29.24. What is the implied credit spread of Facebook's proposed debt issue assuming perfect capital markets?

1. 8.89%

2. 8.64%

3. 19.74%

4. Cannot be determined from information given

3