Great question - in both the sense that's it's a tricky oneyou're asking about, and by providing your work, I can see into your mind a bit more
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To start, this is a sufficient assumption question, so it's probably a bit easier to predict than a necessary assumption question.
Let's get the core. Reading the argument, I notice that there is a lot of conditional language, so I'll write out the ideas (and I would write it very similarly to the way you showed it, but I'd abbreviate more):
~ believe others distrust them --> confident
C: trust others --> "challenge" not "threat"
Then I see there's another premise, so I'll try to link it up, which gives me:
~ believe others distrust them --> confident --> "challenge!"
C: trust others --> "challenge!"
Some keys to moving fast are to abbreviate and link up premises as you go, not wait until the end.
Next, I want to identify the gap. I do this by imagining (or actually writing out if you're feeling overwhelmed) the premise of the conclusion on the left, and the conclusion on the right and see where the chain is missing a link:
trust others --> ????? --> "challenge!"
I can fill in a lot on the right:
trust others ---> ????? --> ~ believe others distrust them --> confident --> "challenge!"
But that first connection is missing. I can expect that the answer will fill this gap (and perhaps by giving me the contrapositive). (C) fills the gaps perfectly: trust others --> ~ believe others distrust them, and the chain is complete. Hallelujah!
As for the wrong answers:
(A) is about folks who believe others distrust them, which might mean we're getting the contrapositive of what we need, however it ends with "trust others" which is not the negation of "trust others"!
(B) links confidence to trust, but it's trust in others. We actually don't care about trusting others. The stimulus is about believing whether others distrust you. (BTW, this whole argument makes me feel neurotic about relationships!)
(D) is linking parts of the "challenge!" - no need for that.
(E) is about distrusting others - again, we're not concerned with that.