Assume Annual Compounding $\sigma = 0.30$ What Is the Price of a One-Year Maturity Call

Multiple Choice

Assume annual compounding. The one-year and two-year zero-coupon rates in the BDT model are 6% and 7%. The volatility is given to be $\sigma = 0.30$ . What is the price of a one-year maturity call option on a 7.5% coupon (annual pay) bond at a strike of $100 (ex-coupon) ?

A) 0.80
B) 0.90
C) 1.00
D) 1.10