I think it is a bad question, because both are correct, because they can have different meanings. "... nor did she understand" often implies a temporary lack of understanding: maybe the phone connection was bad, or the speaker was using many obscure words. "... nor could she understand" often implies a more permanent lack of understanding: maybe the speaker and listener speak different languages, or maybe the listener is Homer Simpson in this scene https://youtu.be/b3yED7w1uu8

the clue to the answer is in the first part which is in the past tense..... both answers would be correct in any sentence but since "didnt" has already been used, we can assume that the past tense is the most suitable answer. remember - in English exams, they often want the most correct answer, even when both choices fit.

The two answers can go. But in this context, did is more appropriate. Thanks!