The correct option is C Present Continuous
Here, 'are baking' indicates Present Continuous. It implies
an action going on at the time of speaking.
Simple Future (will bake) is
used to indicate an action that has not taken place as yet.
Simple Present (bake) is
used to indicate a future event on a designated date as part of a plan.
Present Perfect (have baked) is
used to indicate an action which started in the past and has continued up
untill now.