Final answer:
The paragraph break should be placed after sentence (3.), which introduces the main character's nervousness and uncertainty.
Step-by-step explanation:
The paragraph break should be placed after sentence (3.), which says, 'He just hoped he could live up to the reputation he had.' This is a new idea and topic that introduces the main character's nervousness and uncertainty. Placing the paragraph break here helps to create a clear separation between his hopes and the previous sentences about expectations and first impressions.