Use the Following Information for Questions

Multiple Choice

Use the following information for questions
There is a two-period zero coupon bond that will pay $10 million at t = 2.At t = 0, a call option on this bond is selling at $225,000.The holder can exercise the option at t = 1 at a price of $9,250,000.The current yield on a riskless zero coupon bond that matures at t = 1 is 8%.It is known that the yield on one-period bonds at t = 1 will be 6% or 10%.All bonds are identical except in maturity.
-Suppose that the payoff to the option holder is $250,000.What is the risk-neutral probability that the interest rate will be 6% round up to the nearest figure?

A) 1%
B) 2%
C) 3%
D) 5%
E) 8%