Interest income is taxable in Canada according to the personal marginal tax rate. To help the municipal government to raise money, tax-exempt bonds are issued to attract investors. Basically, investors purchasing tax-exempt bonds don't need to pay tax on their interest income. An investor is now choosing between two bonds. Bond A is tax-free with a yield to maturity rate of 2%. Bond B is a normal bond. Her limit in her Tax-Free Savings Account (TFSA) account is $20,000 and her maginal tax rate is 32%. After thorough consideration, she decided to invest $30,000 in bond A and $20,000 in bond B. Given this allocation decision, what is the most likely YTM for bond B? Hint: The interest income in a TFSA is not taxed.

a.)	The answer is 1.90%.
b.)	The answer is 3.44%.
c.)	The answer is 3.94%.
d.)	The answer is 2.44%.