Step 1: Define the tumour. Acoustic neuroma (vestibular schwannoma) is a benign tumour arising from the Schwann cells of the vestibulocochlear nerve (8th cranial nerve).
Step 2: Locate the origin precisely. Despite the name acoustic, the tumour does not usually start on the cochlear (auditory) division. It most commonly arises from the vestibular portion, and classically from the inferior vestibular division at the level of the Scarpa (vestibular) ganglion near the internal acoustic meatus.
Step 3: Explain the symptoms. As it grows it compresses the adjacent cochlear fibres, producing progressive sensorineural hearing loss and tinnitus; later it can involve the 7th nerve and cerebellopontine angle structures.
Step 4: Eliminate the distractors. The cochlear (auditory) division and the superior vestibular division are not the usual site of origin, and the 7th cranial nerve is only secondarily affected by compression, not the site of the tumour.
Step 5: Conclusion. The tumour involves the inferior vestibular division of the 8th cranial nerve, so option 4 is correct.