When the interest rate is 4% per annum with continuous compounding, which of the following creates a $1000 principal protected note (with the maximum potential payoff while protecting the principal as described in the text)?

a.

A one-year zero coupon bond plus a one-year call option worth about $59

b.

A one-year zero coupon bond plus a one-year call option worth about $49

c.

a one-year zero coupon bond plus a one-year call option worth about $29

d.

A one-year zero coupon bond plus a one-year call option worth about $39