Pepe dio el teléfono a mí.
To use the correct direct object pronoun, you need to the known the object. The object here is el teléfono, which is masculine singular. This means the direct object pronoun must also be masculine singular. Lo is the masculine singular direct object pronoun. This narrows the options to 2 and 3. However...
To know the placement of the direct object pronoun, you must know whether the sentence is imperative or indicative. The former is used for giving commands, and the latter is used for true statements. Here the sentence is an action of someone handing a phone to someone else, thus it is a simple factual statement of something that happened; it is an indicative sentence. In indicative sentences, the direct object pronoun comes before the verb. The verb here is dio, thus lo will come before dio in the final sentence.
Answer:
2) Me lo dio.
