The correct option is C Peter lives
Option C follows the correct syntax where the question word is followed by the noun, and then the verb in the simple present to math with the tense in the first part of the sentence. Option A follows the syntax of an interrogative sentence where the verb lies between the question word and the noun. Options B is incorrect for the tense of the wrong. Peter here is a third person in the singular number. Hence, an -s will be added to the verb indicating the simple present tense. The syntax of the statement of option D also incorrect in this context. The use of the modal right before the main verb indicated confirmation of an already done activity, which is not indicated here. Thus, options A,B and D are all incorrect.