Yeah, you are not allowed to overtake an aircraft on finals. CAR
Of course you are right - a GO AROUND is always an option, if you can't maintain a safe airspeed and separation etc, but
the question does not really go into that.
Presumably if I am not overtaking the aircraft I will be landing behind it. This does not seem like a very good idea ...
In practice I don't think anyone could argue with your logic here - a go-around may be the only option.
CAR 162(6) says the the higher aircraft shall give way to the lower aircraft but does not state how to do this. Logically on finals there are only two options
1) slow down or
2) go around
If option one is not possible then go around.
If you choose to go around and pass the lower aircraft CAR 162(3) says that lower aircraft still has right of way - ie you cannot cut in front of it and land.
In summary, to answer your question, both answers B and D are right. I would have chosen D (go around) but I'm not the examiner.