Solution

The correct answer is Both Statement I and Statement II are correct

Key Points 

• Statement I: "At the interaction level, components provide an operator display interface and an interface with the communication system used." -
  • It is true that at the interaction level, components often provide the user interface (which could include operator display) and the interface with the various other systems it needs to communicate with such as databases, files, other external systems, etc.
• Statement II: "At the I/O management level, components handle operator authentication, report generator and query manager." -
  • The handling of operator authentication, report generation, and query management indeed seems to be the responsibilities of components at the I/O management level.

 So, Option 1) Both Statement I and Statement II are correct.