Final answer:
Otis constructed a parallelogram by constructing a rectangle, as every rectangle is a parallelogram. Rachel should draw a diameter of the circle as the next step in drawing a square inside the circle.
Step-by-step explanation:
When Otis constructed a rectangle using a compass and straightedge, he also constructed a parallelogram. This is because, by definition, every rectangle is a parallelogram with opposite sides that are equal and parallel, and with all angles equal to 90 degrees.
For Rachel to draw a square inside the circle she started, the next step after drawing the circle with a compass setting of r units would be to draw a diameter of the circle. This will give her the necessary reference to then draw perpendicular bisectors, which will be the sides of the square, with each side being 2r units long, fitting perfectly inside the circle with the diameter matching the length of a side of the square.