The decay is K^+ = pi^+ + pi^0.
If you look at their rest energies, K^0 has a higher rest energy than K^+, so it is not possible to create this from the decay of pi^0.
I agree that it seems like K^0 could have been a possibility due to the wording of the question, and how it's possible to expect strangeness to be conserved, but unfortunately pi^0 is the only possible answer. However 2/3 of the marks should be for working out the charge and the fact it is a meson, not a baryon or lepton.