(A) "We were faced with a difficult choice" - "faced with" is the correct collocation when encountering a situation or problem.
(B) "The rest house is near the river" - "near" indicates proximity/location close to the river.
(C) "I saw Rohit sitting beside the new student" - "beside" means next to or at the side of someone.
(D) "The report was full of mistakes" - "full of" is the standard collocation to indicate something is filled or containing something.
Hence, Option 2: (A) - (III), (B) - (I), (C) - (IV), (D) - (II) -> All prepositions correctly match their respective sentences following standard English grammar and common collocations -> correct