An analyst gathers the following information on the following partial 1-year transition matrix for BB rated bonds and credit spread data:

| Probability (%) | A | BBB | BB | B |

|------------------|-------|-------|-------|-------|

| | 2.66 | 4.20 | 85.24 | 7.90 |

| Credit spread | 1.00% | 1.40% | 3.20% | 7.00% |

Assuming no default, the 1-year expected return on a BB rated bond with a YTM of 4.25% and a modified duration of 6.52 is closest to: