A bank's internal rating model indicates that the default probability of small business lending is 1.25% per year and recoveries in these loans average about 40%. if the current 1-year risk-free rate is 5.00% and the bank wishes to earn a risk premium of 1.25% (that is, it targets an expected return of 6.25% per year), what loan spread should it charge its small business customers, assuming that there are no upfront fees?