The magnitude of \( \mathbf{A} + \mathbf{B} \) is given by:
\[
|\mathbf{A} + \mathbf{B}| = \sqrt{|\mathbf{A}|^2 + |\mathbf{B}|^2 + 2 |\mathbf{A}| |\mathbf{B}| \cos \theta}
\]
Since both \( \mathbf{A} \) and \( \mathbf{B} \) are unit vectors, \( |\mathbf{A}| = |\mathbf{B}| = 1 \), so the formula simplifies to:
\[
|\mathbf{A} + \mathbf{B}| = \sqrt{1 + 1 + 2 \cos \theta} = \sqrt{2(1 + \cos \theta)}
\]
Using the trigonometric identity \( 1 + \cos \theta = 2 \cos^2 \frac{\theta}{2} \), we get:
\[
|\mathbf{A} + \mathbf{B}| = \sqrt{4 \cos^2 \frac{\theta}{2}} = 2 \cos \frac{\theta}{2}
\]
Thus, the correct answer is:
\[
\boxed{2 \cos \frac{\theta}{2}}
\]