The Stephan Reaction involves the substitution of a halogen (usually chlorine) in an aromatic compound with an alcohol group. This is typically achieved using a strong base like sodium hydroxide (NaOH).
The general form of the Stephan reaction is:
\[
C_6H_5Cl + NaOH \rightarrow C_6H_5OH + NaCl.
\]
Here, chlorobenzene reacts with sodium hydroxide to form phenol (C6H5OH) and sodium chloride (NaCl). This is a classic example of a nucleophilic substitution reaction where the hydroxide ion from NaOH replaces the chlorine atom in the chlorobenzene.
Therefore, option (2) represents the correct reaction.