Correct Answer: My friend told me that she was learning Hindustani music.

Solution : The correct choice is the first option.

The steps of conversion are as follows:

• The reporting verb "said" is changed to "told".
• The first-person pronoun "I" is changed to the third-person pronoun "she".
• The present continuous tense "am learning" is changed to the past continuous tense "was learning".
• The connector "that" would be used to join the reporting clause and the reported clause.

So, the correct sentence would be: "My friend told me that she was learning Hindustani music."