The correct option is C LIHCNERD
Given, MUNICIPALITY is written as INUMAPICYTIL.
Here, the given word is divided into three equal parts of four letters each and each set of four letter is reversed to obtain the given code as:
MUNI ⟶ INUM,
CIPA ⟶ APIC and
LITY ⟶ YTIL.
Similarly, CHILDREN is written as:
CHIL ⟶ LIHC and
DREN ⟶ NERD.
So, CHILDREN is LIHCNERD.
Hence, option (D) is the correct answer.