In the Ho & Lee (1986)model,assume That the Initial Curve $\delta = 0.95$

Multiple Choice

In the Ho & Lee (1986) model,assume that the initial curve of zero-coupon rates for one and two years is 6% and 7%,respectively.Assume that the probability of an upshift in discount functions is equal to that of a downshift.If the parameter $\delta = 0.95$ ,then the price of a one-year maturity call option on a two-year $100 face value zero-coupon bond in the up node after one year at a strike of $92 will be

A) 1.10
B) 1.20
C) 1.30
D) 1.40