Identify the italicized verb. i believe the train arrives by 3: 00 pm. subjunctive not subjunctive arrive is the italicized verb.

Arrive is not subjunctive.

Subjunctive mood is used to express doubt, a suggestion, a command, or a condition that may not be fact. Typically it can be replaced with should + the verb. 
For example using the verb "wait": It was suggested that he wait until the next morning.//It was suggested that he should wait until the next morning.
This statement isn't suggesting or expressing doubt, but rather a belief that the train WILL arrive by 3:00.

The answer should be c