You need to configure Server1 as a new domain controller in a new forest named contoso.test

HOTSPOT
Your network contains an Active Directory domain named contoso.com. The domain contains
domain controllers that run either Windows Server 2003, Windows Server 2008 R2, or Windows
Server 2012 R2.
You plan to implement a new Active Directory forest. The new forest will be used for testing and will
be isolated from the production network.
In the test network, you deploy a server named Server1 that runs Windows Server 2012 R2.
You need to configure Server1 as a new domain controller in a new forest named contoso.test.
The solution must meet the following requirements:
The functional level of the forest and of the domain must be the same as that of contoso.com.
Server1 must provide name resolution services for contoso.test.
What should you do?
To answer, configure the appropriate options in the answer area.

Answer:

Explanation:

Set the forest function level and the Domain functional level both to Windows Server 2003.
Also check Domain Name (DNS) server.
Note:
* When you deploy AD DS, set the domain and forest functional levels to the highest value that your
environment can support. This way, you can use as many AD DS features as possible. For example, if
you are sure that you will never add domain controllers that run Windows Server 2003 to the
domain or forest, select the Windows Server 2008 functional level during the deployment process.
However, if you might retain or add domain controllers that run Windows Server 2003, select the
Windows Server 2003 functional level.
* You can set the domain functional level to a value that is higher than the forest functional level.
For example, if the forest functional level is Windows Server 2003, you can set the domain functional
level to Windows Server 2003or higher.

Understanding Active Directory Domain Services (AD DS) Functional Levels