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Option 3 : Both conclusions I and II follow 

On drawing Venn diagram of given statements,

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Conclusion I: Some cotton is cloth ⇒ True (All cloth is silk and All silk is cotton ⇒ All cloth is cotton)

Conclusion II: All cloth is cotton ⇒ True (All cloth is silk and All silk is cotton ⇒ All cloth is cotton)

Hence, both conclusions I and II follows. 
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