For those who are unable to understand the question and solution as well. The question is simple but elegant.
What the question is saying is that the keys are represented in 4bits and the 2 least significant bits(last 2 bits while reading from left to right) will decide where the key is going to be placed. And if there is a collision then we have to see the 3rd least significant bit(3 bit from right) and if 3rd LSB of both the keys are same then move on to the 4 LSB. Try to form a binary tree with the conflicted keys. That's it now go to the options and try one by one .. option elimination would be a faster way to solve.
[*For collision just move to the next bit from right to left.]