She said, “Where do you live?”

The correct answer is A: She asked where I lived. This question assesses your understanding of converting direct questions into reported (indirect) questions. Several key transformations are required when moving from direct to indirect speech for questions.

• The reporting verb "said" changes to a verb like "asked," "inquired," or "wondered" to indicate a question.
• For 'wh-questions' (questions starting with who, what, where, when, why, how), the 'wh-word' itself acts as the conjunction, and no additional conjunction like "that" is used.
• The word order changes from interrogative (auxiliary verb + subject + main verb) to affirmative (subject + verb). So, "do you live" becomes "I lived."
• The tense shifts backward (backshifting). The present simple tense ("do you live") becomes the past simple tense ("I lived").
• Pronouns change to reflect the new perspective. "You" (the person being asked) becomes "I" (the person reporting the question).

Options B, C, and D contain errors in tense, word order, or the use of "that," making them incorrect. "She asked where I lived" correctly applies all these rules.