"She is our sister."
Translation:वह हमारी बहन है।
She (standing nearby) is our sister is यह हमारी बहन है। This should also be an allowed answer, since when introducing someone standing nearby is more likely, no?
If your sister is standing next to you in your house or someyhing you can introduce here by using यह but when she is still nearby you but like a bit far away for exanple like you are in a party she is eating food while you are standing to take the buffet and someone asks you who is your sister you can point and use वह. Only use वह when she is a bit far away and point or look towards her and use it else use यह when you are introducing someone.