Concept:
The dry unit weight is related to the void ratio by
\[
\boxed{
\gamma_d
=
\frac{G\gamma_w}{1+e}
}
\]
Also,
\[
\boxed{
w=\frac{Se}{G}
}
\]
where
\[
S=\text{Degree of saturation}.
\]
Step 1: Calculate the void ratio.
Given,
\[
\gamma_d=18\;\text{kN/m}^3,
\]
\[
G=2.7,
\]
\[
\gamma_w=10\;\text{kN/m}^3.
\]
Using
\[
18
=
\frac{2.7\times10}{1+e}
\]
\[
1+e
=
\frac{27}{18}
=
1.5
\]
\[
e=0.5
\]
Step 2: Calculate the degree of saturation.
Given,
\[
w=16\%=0.16
\]
Using
\[
w=\frac{Se}{G}
\]
\[
S
=
\frac{wG}{e}
=
\frac{0.16\times2.7}{0.5}
=
0.864
\]
Hence,
\[
S=86.4\%
\]
Therefore,
\[
\boxed{\text{Degree of Saturation}=86.40\%.}
\]
Thus, the correct option is
\[
\boxed{(B)\;86.40\%.}
\]