In the following question, a sentence has been given in Direct/Indirect speech. Out of the four alternatives suggested, select the one which best expresses the same sentence in Indirect/Direct speech.

They said, "We are quite happy now."

1
They said that they were quite happy now.
2
They said that they are quite happy then.
3
They said that they have been quite happy then.
4
They said that they were quite happy then.

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