Step 1: In a small catchment, water spends most of its travel time as sheet or overland flow before it reaches a defined channel, so how the land is used and how intense the rainfall is directly shape the peak flood. Statement (I) is correct.
Step 2: In a large catchment, most of the travel time is spent inside channels, and this channel storage and routing smooths out and averages the differences caused by land use and rainfall intensity, so Statement (II) is correct.
Step 3: Both statements are correct, so the answer is option 1.