The answer is (4) only if there is no cork inside the water because the air fully escapes through the hole, hence no more air pressure pushing at the water, leaving the level inside and outside the cup the same.

In this case, the rise in the water level is due to the volume of water displaced due to the volume of the cork.    The volume of the cork is constant.  However, when the surface area of water is reduced due to the cup, the height has to increase to maintain the constant volume of the cork.

Thank you very much sushi88. May god bless you. 🙂

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