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.