The words "racket," "sauntering," and "smirked" contribute to the overall tone and meaning of the paragraph by suggesting that the narrator and K.P. are approaching the spooky situation with a sense of confidence and nonchalance. The use of "racket" indicates that there were rumors or discussions that piqued their interest, while "sauntering" conveys a casual and relaxed attitude towards the ominous setting. "Smirked" implies a sense of amusement or mockery in response to the creepy atmosphere.
Given this analysis, the correct answer is:
c. They imply the narrator considers the adventure a joke.