Choice "B" is correct. If interest rates have increased, then the bonds' interest rate would be less attractive to investors now than when the bonds were originally issued. This would most likely cause a decline in the bonds' market value. Note that because the bond investment is classified as held-to-maturity, the investment will be reported at amortized cost, not fair value.
Choice "c" is incorrect. A large stock dividend might materially impact stock prices but most likely would have no effect on bond prices.
Choice "a" is incorrect. Bond prices in the open market are not related to Lee's carrying amount of the bonds.
Choice "d" is incorrect. If interest rates have declined, then the bonds' interest rate would be even greater than market rates were when the bonds were originally issued. The bonds would be selling at a premium rather than a discount.