The correct answer to this question is B. The word or phrase might contain a grammatical error. If the line were red, it would indicate a spelling error. Spell and grammar checks are one of the essential features of Microsoft Word, so much so that many people can't write or spell without it. When the wavy line appears, one can right click on the word or punctuation in question.
This right-click will load a suggestion to correct the error appropriately. There is also a setting where you can have Microsoft Word always automatically correct the spelling of certain words for you, which is crucial if you find yourself constant misspelling the same word.