Option(3) is correct.
Assumption I: There is a doubt about the quality of water being supplied in the town: Cholera is spread through water or through food and to prevent the spread of cholera in town, doubt about the quality of water is precautionary. So, this assumption is implicit.
Assumption II: There is some report of cholera in town: As indicated in the given statement, the medical department attempt to prevent the spread of cholera and the spreading of disease only takes place if it exists. So, this assumption is implicit.
Hence, the correct answer is an option(3)i.e., Both the assumptions are correct.