A modem (modulator–demodulator) is a Physical-Layer device that lets digital computer data travel over channels that carry analog signals, such as ordinary telephone lines (PSTN). Evaluating each statement clarifies exactly what a modem does and does not do:

• S1: TRUE — Modems are needed precisely because the transmission medium (e.g. a voice-grade telephone line) is designed to carry analog waveforms, not raw digital pulses.
• S2: TRUE — Modulation is the transmit-side process that impresses the outgoing digital bit stream onto an analog carrier (by varying amplitude, frequency, or phase), producing an analog signal suitable for the line.
• S3: TRUE — Demodulation is the receive-side inverse: it recovers the original digital data from the incoming analog signal.
• S4: FALSE — MAC addresses are burned into the Network Interface Card (NIC) at manufacture and operate at the Data-Link Layer; a modem plays no role in assigning them.

So the true statements are S1, S2 and S3. The choices that include S4 must be rejected, because a modem never assigns hardware addresses. The choice limited to only S1 and S2 is incomplete, since demodulation (S3) is an equally correct and essential half of the modem's job. Hence the correct combination is only S1, S2 and S3.