It looks like 2) "it" would need to be changed.
Answer: Spain and Portugal
Explanation: The subject is the who or what of the sentence. It's what the sentence is about. In this sentence, the places that are occupying the Iberian Peninsula are Spain and Portugal.
<em>The</em><em> </em><em>Model </em><em>Was </em><em>Dressed </em><em>To </em><em>Perfection </em><em>In </em><em>A </em><em>Beautiful </em><em>Outfit </em><em>And </em><em>A </em><em>Stylish </em><em>Scarf </em><em> </em><em>To </em><em>Match </em><em>And </em><em>She </em><em>Worked </em><em>C</em><em>aptivity </em>
