The correct answer is the third one. Here is for you the basic rules:
Rule 1. Use double quotation marks to set off a direct (word-for-word) quotation.
Correct: "I hope you will be here," he said.
Incorrect: He said that he "hoped I would be there." (The quotation marks are incorrect because hoped I would be there does not state the speaker's exact words.)
Rule 2a. Always capitalize the first word in a complete quotation, even midsentence.
Example: Lamarr said, "The case is far from over, and we will win."
Rule 2b. Do not capitalize quoted material that continues a sentence.
Example: Lamarr said that the case was "far from over" and that "we will win."
