First, we must calculate the value of the bond that will serve as collateral for the repo transaction. In the bond market, standard quotes are clean prices. The value of collateral in a repo, however, is based on the dirty price (Clean Price + Accrued Interest).

1. Calculate the Accrued Interest (AI): The bond was purchased on a coupon date and repo'd 3 months later. Therefore, exactly 3 months of interest have accrued. $AI = \text{Notional} \times \text{Annual Coupon Rate} \times (\text{Months Accrued} / 12)$ $AI = 100,000 \times 5\% \times (3 / 12) = \text{USD } 1,250$

2. Calculate the Dirty Price: The clean price of the bond is 98% of the par value. $\text{Clean Price} = 100,000 \times 0.98 = \text{USD } 98,000$ $\text{Dirty Price} = \text{Clean Price} + AI = 98,000 + 1,250 = \text{USD } 99,250$

3. Calculate the Repo Loan Amount: A 5% haircut is applied to the market value (dirty price) of the bond to determine the loan amount the bank receives. $\text{Loan Amount} = \text{Dirty Price} \times (1 - \text{Haircut})$ $\text{Loan Amount} = 99,250 \times (1 - 0.05) = \text{USD } 94,287.50$

4. Calculate the Expected Cash Outflow: The expected cash outflow at the expiration of the 6-month repo is the repayment of the loan principal plus the interest accrued over the repo term. $\text{Repayment} = \text{Loan Amount} \times \left(1 + \text{Repo Rate} \times \frac{\text{Term in Months}}{12}\right)$ $\text{Repayment} = 94,287.50 \times \left(1 + 0.03 \times \frac{6}{12}\right) = 94,287.50 \times 1.015 = \text{USD } 95,701.81$

Rounded to the nearest dollar, the expected cash outflow is USD 95,702, which corresponds to option B.