The spread on a one-year BBB-rated bond relative to the risk-free treasury of similar maturity is 1.4%. It is estimated that the contribution to this spread by all non-credit factors (e.g., liquidity risk, taxes) is 0.4%. Assuming the loss rate given default (LR) for the underlying credit is 40%, what is, approximately, the implied default probability for this bond?

1. 1.67%
2. 2.33%
3. 3.50%
4. 2.50%