Step 1: Write K in terms of angular momentum:
$K = \frac{L^2}{2I}$, where $L = I\omega$ is conserved.
Step 2: Apply the change:
$L$ stays the same and $I$ becomes $3I$, so $K' = \frac{L^2}{2(3I)} = \frac13\cdot\frac{L^2}{2I} = \frac K3$.
Step 3: Why it falls:
Stretching the arms increases $I$. With $L$ fixed, $K\propto 1/I$, so it must decrease.
Step 4: Where the lost energy goes:
The kinetic energy is not conserved, only the angular momentum is. The dancer's muscles do negative work while the arms move outward, which is why the energy drops to one third and not to any other value.
Final Answer:
$K/3$, option (B).
\[ \boxed{\frac{K}{3} \text{ (B)}} \]