C is the answer - however A is also correct based on the way it is worded and as defined by the text. I think it might be worth writing to the CFA.
Excerpt from the text from pg 183 (emphasis added) -
“To take an organizational perspective first, risk budgeting involves establishing objectives for individuals, groups, or divisions of an organization that take into account the allocation of an acceptable level of risk. As an example, the foreign exchange (FX) trading desk of a bank could be allocated capital of €100 million and permitted a daily VaR of €5 million. In other words, the desk is granted a budget, expressed in terms of allocated capital and an acceptable level of risk, expressed in euro amounts of VaR. In variations on this theme, instead of using VaR units an organization might allocate risk based on individual transaction size, the amount of working capital needed to support the portfolio, or the amount of losses acceptable for any given time period (e.g., one month). In any case, the innovation here is that the enterprise allocates risk capital before the fact in order to provide guidance on the acceptable amount of risky activities that a given unit can undertake.
A well-run risk-taking enterprise manages these limits carefully and constantly monitors their implementation. Any excesses are reported to management immediately for corrective action. Under this type of regime, management can compare the profits generated by each unit with the amount of capital and risk employed. So, to continue our example from above, say the FX trading desk made a quarterly profit of €20 million from its allocation. The bank’s fixed-income trading desk was allocated capital of €200 million and permitted a daily VaR of €5 million; the fixed-income trading desk made €25 million in quarterly trading profits. We note that the allocated daily VaRs for the two business areas are the same, so each area has the same risk budget, and that the fixed-income desk generated better returns on the VaR allocation, but worse on the allocation of actual capital, than did the FX desk. (The FX desk shows a €20/€100 = 20% return on capital versus €25/€200 = 12.5% for the fixed-income desk.) This type of scenario is quite common and highlights the complexities of the interaction between risk management and capital allocation. Risk and capital are finite resources that must be allocated carefully.”