The equivalent ending for an adverb in English that ends in "ly" is mente. The first option is the correct one. This is the most common way to form adverbs in Spanish. You just take an adjective, for example, triste (sad) and add -mente to its end in order to create an adverb: tristemente, meaning sadly. It is quite the same as in English, where you have an adjective sad, and add -ly to its ending to create an adverb sadly.
Won’t let me type it in so here’s a picture of the answers
Nancy usa un sombrero amarillo.
