The physical muscles of the face are connected to perception of emotion, and placing one's face into a "smile" by biting a pencil can lead people to perceive happiness. The key to this question was understanding the terminology used in the question. In this case, the "physical symptoms" are actually positive, they are the muscles of the face being stimulated into the shape of a smile.

The James-Lange Theory is based on the idea that physical changes elicit emotion. William James and Carl Lange developed the theory independently, but formulated a cohesive theory. The James-Lange Theory, in its initial formation, held that if physical sensation were completely removed emotional response would also be removed. Modern theorists have since revised the theory to soften this stance, and hold rather that physical sensation significantly affects emotional response, but the relationship is not total. Support for this comes from studies of spinal cord injuries in which emotions are experienced less intensely.

In Schachter's Two-Factor Theory of emotion, the two factors are physiological arousal and cognitive label. First a person will experience a physiological sensation, and will then try to place a label on the context surrounding this response, in an effort to explain it. According to Schachter both factors are needed, and are mutually reinforcing. 

Schacter-Singer's two-factor theory of emotion poses that in order for an emotion to be considered as such, a person must experience physical arousal and be able to cognitively recognize and label this.

According to Schacter and Singer, an essential component of the way we experience emotion is the labeling of physical sensations and feelings. The way we label emotions influence how we are able to cope with them and, depending on the label, it may even prolong the emotion.

"Display rules" are norms for the expression of emotion that differ from culture to culture. Examples of display rules include neutralizing (feeling an emotion but showing no emotion), masking (feeling an emotion but showing a different emotion), and intensification (feeling an emotion but showing it more intensely than it is felt). Exaggerating is not a key term associated with display rules.

Appraisal is how we interpret events, which affects and even determines the emotions that we feel about those events. Appraisal is a cognitive process and involves explaining and evaluating how and why an event occurred the way it did. Reappraisal involves reevaluating and re-explaining the meaning of an event and it is an effective way to change the emotions associated with the event. 

The James-Lange theory of emotion states that an event causes physical arousal in the body. The brain interprets this arousal. Afterwards, based on the specific reactions, the brain identifies the arousal as a certain emotion (i.e. fear, happiness, sadness, or anger). In this case, the correct answer follows this theory because it states that the physiological reaction will occur first and then the brain will alert the man indicating he is experiencing fear.

The Cannon-Bard theory states that the brain cannot rely on bodily responses to know which emotions it is experiencing. This is supported by the observation that a racing heart can indicate excitement, fear, or anger. 

The opponent-process theory states that one emotion elicits a feeling of the opposite emotion. While someone may initiate an argument to release his or her anger, this is not consistent with the opponent process theory of emotion.