The correct answer is C (96.23). The price of the bond is calculated using the geometric average of the forward rates to derive the spot rates. The formula for the present value (PV) of the bond is:

$PV = \frac{PMT}{(1 + Z_1)} + \frac{PMT}{(1 + Z_2)^2} + \frac{PMT + FV}{(1 + Z_3)^3}$

Where:

• $Z_1$ is the spot rate for Period 1 (1%).
• $Z_2$ is the spot rate for Period 2, derived as $(1 + 1\%) \times (1 + 2\%)$.
• $Z_3$ is the spot rate for Period 3, derived as $(1 + 1\%) \times (1 + 2\%) \times (1 + 4\%)$.

Substituting the values:

$PV = \frac{1}{(1 + 1\%)} + \frac{1}{(1 + 1\%)(1 + 2\%)} + \frac{1 + 100}{(1 + 1\%)(1 + 2\%)(1 + 4\%)}$

$PV = 0.9901 + 0.9707 + 94.2685 = 96.2293$

Rounded to two decimal places, the price is 96.23.