Step 1: The ray of light is incident normally on the prism at point \( B \), which means that the angle of incidence \( i = 0^\circ \) on face \( AB \).
Step 2: After striking face \( AC \), the angle of incidence \( \theta \) will be equal to the angle \( \angle ABC = 60^\circ \) because of the geometry of the prism.
Step 3: The refractive index \( \mu = \sqrt{2} \), and for total internal reflection to occur, the angle of incidence at face \( AC \) must exceed the critical angle. The critical angle \( \theta_c \) is given by:
\[
\sin \theta_c = \frac{1}{\mu}
\]
Substituting \( \mu = \sqrt{2} \):
\[
\sin \theta_c = \frac{1}{\sqrt{2}} \Rightarrow \theta_c = \sin^{-1}\left( \frac{1}{\sqrt{2}} \right) = 45^\circ
\]
Step 4: Since the angle of incidence on face \( AC \) is \( 60^\circ \), which is greater than the critical angle \( 45^\circ \), the ray undergoes total internal reflection inside the prism.
Conclusion: The correct answer is (D) undergo total internal reflection.