If the face value of a bond decreases, what would you expect to happen to bond prices?

a) You would expect bond prices to increase because bond prices are the sum of the present values of the future payments associated with the bond. The higher the interest rate, the higher the present value of these payments.

b) You would expect bond prices to fall since bond prices are the sum of the present values of the future payments associated with the bond. The lower the face value, the lower the present value of these payments.

c) Bond prices and interest rates are unrelated, so you should expect no change in bond prices.

d) You would expect bond prices to increase because bond prices and interest rates are positively related.