At the beginning of the year, a firm bought an AA-rated corporate bond at USD 110 per USD 100 face value. Using market data, the risk manager estimates the following year-end values for the bond based on interest rate simulations informed by the economics team:

| Rating | Year-End Bonds Value |

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

| AAA | 112 |

| AA | 109 |

| A | 105 |

| BBB | 101 |

| BB | 92 |

| B | 83 |

| CCC | 73 |

| Default| 50 |

In addition, the risk manager estimates the 1-year transition probabilities on the AA-rated corporate bond:

| Rating | Probability of State |

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

| AAA | 3.00% |

| AA | 85.00% |

| A | 7.00% |

| BBB | 4.00% |

| BB | 0.35% |

What is the expected return on this bond?