Explanation:

In modern versions of Microsoft Word, a blue wavy underline typically indicates a grammatical error, helping users identify and correct issues related to sentence structure, punctuation, and other grammar rules. Option (1) 'Red' wavy underline indicates spelling errors. Option (2) 'Green' wavy underline was used for grammar in older Word versions, but now often signifies contextual spelling or style suggestions. Option (4) 'Yellow' is not used for standard grammar error indication.