For instance, if a user selects option 1, the text is as an example, "yes, and i agree to the terms and conditions"
And i would want my hyperlink to the T&C's.
If you want to do this, use graphical radio group/buttons. You can then use the rich text dialog to input whatever you like as the caption.
If you want to style them like regular radio buttons, follow this link: How do I make graphical radio buttons look like the standard radio button group?
Do not use jQuery to do this as this will not be persisted across multiple pages.
The clickable area of a radio button includes the text, so having a link in that text would probably confuse the user/browser on what action to take (ie, did they intend to select the radio button, or follow the link).
If you really want to pursue this option, it's probably achievable by running a jQuery script on page load to replace the HTML content of the radio button, but I imagine you could get inconsistent behavior across different browsers and devices - for the reason above.