The correct answer is C. down the street.
As the name itself says, a prepositional phrase begins with a preposition. The only preposition in the sentence above is the word <em /><em>down, </em>which means that the following words are going to make a prepositional phrase with it. This prepositional phrase is telling us the location of the friend, where he or she lives.
It creates a mood of anticipation because it seems that the two characters might confess their love.
