Colloidal solutions are classified based on the physical state of the dispersed phase and the dispersion medium.
-   Gel: Dispersed phase is liquid, dispersion medium is solid.
 (e.
g.
, jelly, cheese, butter).
-   Emulsion: Dispersed phase is liquid, dispersion medium is liquid.
 (e.
g.
, milk, hair cream, mayonnaise).
-   Foam: Dispersed phase is gas, dispersion medium is liquid.
 (e.
g.
, whipped cream, soap lather).
    (Solid foam: Dispersed phase gas, medium solid, e.
g.
, pumice stone, styrofoam).
-   Aerosol: Dispersed phase is solid or liquid, dispersion medium is gas.
    -   Liquid in Gas (e.
g.
, fog, mist, clouds, hair sprays).
    -   Solid in Gas (e.
g.
, smoke, dust).
The question states that both the dispersed phase and the dispersion medium are in the liquid phase.
This type of colloid is called an emulsion.
This matches option (2).