The question asks for a direction (is Fund A higher?), but every fact you are given is about size, not direction. That mismatch is the whole problem.
Statement (1): the prices "differ by $40." That sounds like a settled answer, but a $40 difference can mean Fund A is $40 higher (140 vs 100, Yes) or $40 lower (100 vs 140, No). The gap is fixed; the leader is not. Not sufficient.
Statement (2): the funds started equal a year ago and each "changed by the same number of dollars in absolute value." It is tempting to conclude they end up equal again, but "the same in absolute value" allows opposite directions. If A rose $10 and B rose $10, they are equal (No). If A rose $10 and B fell $10, A is ahead (Yes). Not sufficient.
Together: Statement (2) leaves three possibilities for A minus B: zero, or plus or minus twice the size of the change. Statement (1) rules out zero (the gap is $40), but it leaves both positive $40 and negative $40. Starting from $100 each, A up $20 and B down $20 gives 120 vs 80 (Yes); A down $20 and B up $20 gives 80 vs 120 (No). Both scenarios fit both statements. You know the gap is exactly $40 and that the moves were equal in size, and you still cannot say who is ahead.
The answer is (E). Two facts about the size of a gap or the size of a change can never settle which direction the gap runs.