The person who posted the question should have specified environment. I didn't have to run the code to know the VALUES statement wouldn't work in 2005. Therefore, I chose "Error" even though the Error answer was wrong. EDIT - I thought there was a typo in the last answer. It's happened before.
I was tempted to choose 3, but couldn't figure out how the VALUES statement would work. If I'd known what edition, it would have changed the way I read the question.