Answer: C

The correct answer is C. This question involves bond valuation using a linear combination approach: - The equation sets up cash flow matching at maturity - Solving for X₁ gives 0.52 - The fair price is calculated as 0.52 × 94.40 + 0.48 × 101.30 = 97.71 This represents the arbitrage-free price where the target bond's cash flows are replicated by a combination of two other bonds, ensuring no risk-free profit opportunities exist.

Author: LeetQuiz Editorial Team