Correct answer is (B) 4 states in mDFA.
Explanation already mentioned by other users.
Extra:
The official answer key (C) 3 states is wrong. The following snapshot shows it why.
The above example ignores the Dead state while constructing mDFA from DFA(Wrong approach because Dead states should always be included in the mDFA- either implicitly or explicitly)
Reference link 1 - Good reference
Reference link 2 - Good reference
Reference link 3 <- CAUTION - Avoid links like this, it contains incorrect information.