0x stands for hexadecimal notation . We know that a hexidecimal digit has 4 binary digit as its equivalent.But word size given = 16 bits and no of digits given is 2 only.So we have to precede this by 2 0's in hexadecimal so that we get 16 bit word.
Hence 0x C5 = 0x 00C5
Now not operation is performed on this hence we invert all the bits in the binary representation of the above number.
Binary representation of the given number is : 0000 0000 1100 0101
So the complement (not operator result) will be : 1111 1111 0011 1010
This can be written in hexadecimal as : 0x FF3A
Hence B) is the correct option.