Yes you are correct but that is just one of the multiple type of formats a layout group can be used for. If you look closer all the first three options apply to layout groups as well. But they are not the reason why we use layout groups. 

I do agree that stacked is one format which is wrong in it but in that scenario we could use any of the other choices, so that is the correct answer.

First option : It is true not only for layout groups. Even a section can have another section from a different class.

Second option : It is true not only for layout groups. Even a section can embed another section.

Third option : It is true only for layout groups and doesn't fail in any way for this question.

Fourth option : It is true for layout groups but does fail for stacked layout group.

So, I still see Third option which has no reason to be rejected for the given question.

Hi Sudarshan,

Like I mentioned in my previous reply, third option can be done on any regular layout and it does not require layout group. We can embed a layout or  a section inside any layout in Pega7.

thanks