Payoff of Interest Rate Options exactly, reading, interest, although

Walex

Can someone explain to me how interest rate options pay off.

Take an example of a option on 90 Day LIBOR. Say the strike is 5%, LIBOR is 6% at expiration, and the notional is $10MM

Is it:

a) At expiration, (6% - 5%)*(90/360)*$10MM = $25,000

or b) At expiration, the present value of $25,000 paid in 90 days.

In the reading on interest rate derivatives, it suggests that it is a), but in the reading on options, the Black model calculates it as b (although not exactly).

Can someone clarify this for me because I'm stumped!