The statement: is a variable declaration statement. It declares a variable, called water, that is of type Water. That is, water will only be used to reference an object of type Water (aka: a Water instance). It is not being assign any object at this time and therefore will take on a default value of null. So, (d). I did not include (a) because no object is yet referenced by the variable. I did not include (b) because water is an object reference to a Water instance -- not a Type instance. I declined on (c) because you would need to declare water again at the same level for that error to occur.