New breed of sheep is developed by :

Cross breeding

The correct answer is Option (1)- Cross breeding

Cross-breeding: In this method, superior males of one breed are mated with superior females of another breed. Cross-breeding allows the desirable qualities of two different breeds to be combined. The progeny hybrid animals may themselves be used for commercial production. Alternatively, they may be subjected to some form of inbreeding and selection to develop new stable breeds that may be superior to the existing breeds.

Many new animal breeds have been developed by this approach. Hisardale is a new breed of sheep developed in Punjab by crossing Bikaneri ewes and Marino rams.