Choose the correct Figure of Speech used in the sentence from the giv…

The correct answer is Option (2) → Euphemism

Euphemism:

• A euphemism is a mild or indirect expression used in place of a harsh or unpleasant one.
• It softens what is said, to be polite or to avoid giving offence.
• This sentence: instead of calling the explanation a lie, the speaker calls it "a fairy tale", a gentler way of saying that it is untrue.
  Example: "He passed away" is a euphemism for "he died".

Why the Other Options are Incorrect?

Option 1: Oxymoron — Incorrect. An oxymoron joins two words of opposite meaning; the sentence has no such pair.
Example: There was a deafening silence in the hall.

Option 3: Metonymy — Incorrect. Metonymy replaces the name of a thing with something closely linked to it; nothing is named by an associated thing here.
Example: The crown has approved the new law (the crown = the king).

Option 4: Personification — Incorrect. Personification gives human qualities to a non-human thing; the explanation is given no human quality.
Example: The wind whispered through the trees.

Contrast: a euphemism softens a harsh truth, an oxymoron joins opposites, metonymy names a thing by something linked to it, and personification gives a thing human qualities.

Note: The sentence also has the form of a metaphor: the explanation is called a fairy tale without "like" or "as". Metaphor is not among the options; of the figures offered, the sentence fits Euphemism, because "a fairy tale" is a softer way of saying "a lie".