Answer given by them is absolutely right... I think the problem with your solution is that you are including the additional bits..
You must understand the question.. It is asking for additional bits in cache directory,not for the tag bits..
Therefore.. 16 bits will be for tag
5 bits for block size and 11 bits for sets..
#of cache lines are (2^8 * 2^10)/2^5= 2^13
#of sets =2^11=2^13/k
Then k should be equal to 4.