C is correct. In order to find the proper amount, we first need to calculate the current market value of the portfolio (P). Assuming continuous compounding, the current value of the portfolio is: $P = 88 \times e^{-0.04 \times 5} = USD 72.05 million$ The desired portfolio duration (after the sale of the 5-year bond and purchase of the 1.5-year bond) can be expressed as $1.5 \times W + 5 \times (1 - W)$, where $W$ is the weight of the 1.5-year maturity bond and $(1 - W)$ is the weight of the 5-year maturity zero-coupon bond. Thus, the weighted duration of the new bond portfolio should be equal to 3 years: $1.5 \times W + 5 \times (1 - W) = 3$ which gives $W = 0.5714$ and $(1 - W) = 0.4286$. Therefore, the value of the 1.5-year maturity bond = $0.5714 \times 72.05 = USD 41.17 million$.