The strike price is the PV of the bond (5.5% coupon, 4 years to maturity) at a 5.9% YTM (= 3.9% + 2.0%), which is 98.593 (% of par). On your TI-BAII Plus, the inputs are: 5.9/2=I/Y; 27.50=PMT; 1000=FV; 8=N; CPT PV= 985.93.
The current bond value is the PV with a yield to maturity of 6.2%, which is 97.553 (% of par). On your TI-BAII Plus, the inputs are: 6.2/2=I/Y; 27.50=PMT; 1000=FV; 8=N; CPT PV= 975.53. The option is in the money by (0.98593 − 0.97553) × 10,000,000 = $104,000
