A is correct. The following information is given:

• $S$ = stock index value = 3,405
• $K$ = strike price of the option on the index = 3,500
• $T$ = time to expiration of option = 1.0
• $r$ = risk-free interest rate = 0.85%
• $q$ = dividend yield on the index = 2.92%
• $u$ = upward move in the index price = 1.1850
• $d$ = downward move in the index price = 0.8439

Since this is a two-step tree, each step is equivalent to a 6-month period ($\Delta t = 6/12 = 0.5$). The risk-neutral probability of an upward move, $p$, is found as follows:

$p = \frac{e^{(r - q)\Delta t} - d}{u - d} = \frac{e^{(0.0085 - 0.0292) \times 0.5} - 0.8439}{1.1850 - 0.8439} = 0.4275$