Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.

Betty Tatton is a fixed income analyst with the hedge fund Sailboat Asset Management (SAM). SAM invests in a variety of global fixed-income strategies, including fixed-income arbitrage. Tatton is responsible for pricing individual investments and analyzing market data to assess the opportunity for arbitrage. She uses two methods to value bonds:Method 1: Discount each year’s cash flow separately using the appropriate interest rate curve.Method 2: Build and use a binomial interest rate tree.Tatton compiles pricing data for a list of annual pay bonds (Exhibit 1). Each of the bonds will mature in two years, and Tatton considers the bonds as being risk-free; both the one-year and two-year benchmark spot rates are 2%. Tatton calculates the arbitrage-free prices and identifies an arbitrage opportunity to recommend to her team.
| Exhibit 1.Market Data for Selected Bonds |
| Asset | Coupon | Market Price |
| Bond A | 1% | 98.0584 |
| Bond B | 3% | 100.9641 |
| Bond C | 5% | 105.8247 |


Next, Tatton uses the benchmark yield curve provided in Exhibit 2 to consider arbitrage opportunities of both option-free corporate bonds and corporate bonds with embedded options. The benchmark bonds in Exhibit 2 pay coupons annually, and the bonds are priced at par.
| Exhibit 2.Benchmark Par Curve |
| Maturity(years)Yield to Maturity(YTM) |
| 13.0%24.0%35.0% |


Tatton then identifies three mispriced three-year annual-pay bonds and compiles data on the bonds (see Exhibit 3).
| Exhibit 3.Market Data of Annual-Pay Corporate Bonds |
| Company | Coupon | Market Price | Yield | Embedded Option? |
| Hutto-Barkley Inc. | 3% | 94.9984 | 5.6% | No |
| Luna y Estrellas Intl. | 0% | 88.8996 | 4.0% | Yes |
| Peat on Scorpio Motors | 0% | 83.9619 | 6.0% | No |


Lastly, Tatton identifies two mispriced Swiss bonds, Bond X, a three-year bond, and Bond Y, a five-year bond. Both are annual-pay bonds with a coupon rate of 6%. To calculate the bonds’ values, Tatton devises the first three years of the interest rate lognormal tree presented in Exhibit 4 using historical interest rate volatility data. Tatton considers how this data would change if implied volatility, which is higher than historical volatility, were used instead.
| Exhibit 4.Interest Rate Tree； Forward Rates Based on Swiss Market |
| Year 1 | Year 2 | Year 3 |
| 4% | 6% |
| 1% | 5% |
| 2% | 3% |


 
Based on Exhibit 4 and using Method 2, the correct price for Bond X is closest to:
Option A:97.2998.
Option B:109.0085.
Option C:115.0085.

Answer: B