Step 1: AVG Function Behavior.
The SQL AVG() function computes the arithmetic mean of a column, specifically excluding NULL values.
Step 2: Valid Data Identification.
From the MARKS column: 20, 40, NULL, 30.
Excluding NULLs, the valid data points are: 20, 40, 30.
Step 3: Average Calculation.
\[\text{Average} = \frac{20 + 40 + 30}{3} = \frac{90}{3} = 30\]
Step 4: Incorrect Option Exclusion.
- Option 2 (22.5): Incorrect. This calculation incorrectly includes NULL as a data point (4 rows).
- Option 3 (90): Incorrect. This represents the sum, not the average.
- Option 4 (23): Incorrect. This is not the result of a correct calculation.
Final Result: \[\boxed{30}\]