Problem on Floating Point Representation
First, this is not the way standard IEEE P754 single precision floating point numbers are represented :


Exponent is not two's complement, there is instead an offset, for IEEE normalised : F=2^(Exponent - 127) * 1.Mantissa * Sign
Normalised numbers have an exponent different from 00 (being denormals) and FF (for infinites, NaN)


If this peculiar format has no implicit 1, mantissa should be between 0.10[..]0000 and 0.11[..]1111 :  Answer (D) or between 1.0000 and 1.11111, which is your proposal.

(IIRC, Intel double extended x87 80bits format does not have the implicit 1 and works as you describe. It is not striclty IEEE compliant, the 8087 being older than the standard.)