Demonstrative pronouns are used for showing things. ‘This’, ‘that’, ‘these’ and ‘those’ are demonstrative pronouns. We use ‘this’ and ‘these’ when speaking about things near someone/something, while we use ‘that’ and ‘those’ when speaking about things away from someone/something. ‘This’ and ‘that’ are used for one person, animal or thing, whereas ‘these’ and ‘those’ are used for more than one person or thing. The given sentence speaks of just one ‘favourite book’ therefore ‘these’ and ‘those’ cannot be used. Thus options A and D are incorrect. Since the sentence doesn’t suggest whether the book is near or far both ‘this’ and ‘that’ can be used. Thus options B and C are correct.