Il Palazzo:
... What? No. Listen.
The ice cube, with the stone attached, remains floating. The stone only sinks when it becomes detached from the ice cube. None of this implies that the stone is less dense than water. If it were, it wouldn't sink at all!
The ice cube starts out floating, with the stone attached. Eventually, at some point, the stone becomes detached, yet there is still a finite volume of ice there.
Now now, where do you get the thing about there being some ice left, when the question explictly states that the stone gets released after ALL of it melts?
Rereading the question, it is worded rather poorly. The question inadvertently implies that the stone has a density infinitesimally greater than that of water, which is... pretty damn strange.
What if that is literally true, though? Then: N answer is correct at all. While the ice melts, A and D make sense, since the object is still buoyant, therefore ice melting off it won't affect the water level, for reasons I've already mentioned. The object still remains buoyant for the entirety of the ice's lifetime, since the stone apparently only sinks once all the ice is melted. Therefore, yeah, A and D are true so far, with the water level staying the same. However, after that point, with the stone sinking and the ice totally melted, no further change in the water level can even occur, since all that you have left is a rock that has already become fully submerged. In other words, if the question is interpreted like that, there
is no right answer; the water level would remain the same as the object sheds water, and by the time the object has shed all its ice as water and the rock sinks down, the rock has already just become fully submerged by the process, so no further change in water level is possible.
In other words, the question doesn't make sense if you interpret it that way, but that really
is what the question is asking if you interpret it literally. None of the answers are valid unless there's some ice left when the stone is released.