I guessed right, but the answer is wrong!
I ran the script and got an error
Error Character '', hexadecimal value 0x0 is illegal in XML documents.
ie the first option, which is not the correct answer.
As well as this error, I also got an XML segment, which I surrounded by a root element. Displaying this in IE gives an error
'an invalid character was found in text context'.
but displays the XML anyway.
So the actual answer seems to be a selection of the options.
(1) the error is given. Also (3) the XML is invalid in any environment (just because some environment might display it doesn't make it valid). But also (4) IE makes an attempt to display it (though gives an error).