Consider a BBB-rated bond that has a YTM of 5.50% and a modified duration of 7.54..What is the expected return on the bond over the next year given the partial credit transition and credit spread as given below, assuming that market spreads and yields will remain stable over the year?

One-year transition matrix for BBB rated bonds and credit spreads:

\begin{tabular}{|l|l|l|l|l|l|l|l|} \hline & AAA & AA & A & BBB & BB & B & CCC \\ \hline Probability (\%) & 0.02 & 0.30 & 4.80 & 85.73 & 6.95 & 1.75 & 0.45 \\ Credit Spread & 0.60% & 0.90% & 1.10% & 1.50% & 3.40% & 6.50% & 9.50% \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|l|l|l|l|} \hline & AAA & AA & A & BBB & BB & B & CCC \\ \hline Probability (\%) & 0.02 & 0.30 & 4.80 & 85.73 & 6.95 & 1.75 & 0.45 \\ Credit Spread & 0.60% & 0.90% & 1.10% & 1.50% & 3.40% & 6.50% & 9.50% \\ \hline \end{tabular}