DRAG DROP
A company has a Windows Server 2008 domain controller and a SharePoint 2007 farm. All servers on
the network run Windows Server 2008.
You must provide single sign-on for Office 365 SharePoint sites from the company’s network.
You need to install the required software.
What should you install? To answer, drag the appropriate action to the correct location. Each answer
may be used once, more than once, or not at all. You may need to drag the split bar between panes or
scroll to view content.
Answer: 
Explanation:
http://technet.microsoft.com/en-us/library/cc771145.aspx
I’m inclined to say this is correct because there is no reason to upgrade the on prem SharePoint environment. AD FS 2.0 requires .NET Frameowrk 3.5 SP1 so that’s the first one, then install AD FS 2.0 and after that install Rollup 3.
May want to upgrade Sharepoint 2007 as it is now End-Of-Life:
https://support.microsoft.com/en-us/lifecycle/search/16496
Older doc that shows you could do single sign on with 2007/2010:
https://blogs.msdn.microsoft.com/sharepoint__cloud/2011/12/06/steps-to-configure-single-sign-on-for-office-365/
BUT the kicker is Hybrid which only requires at least Sharepoint 2013:
https://technet.microsoft.com/en-us/library/jj838715.aspx
https://technet.microsoft.com/en-us/library/mt125509.aspx