In Year 1, Lee Co. acquired, at a premium, Enfield, Inc. 10-year bonds as a held-to-maturity investment. At December 31, Year 2, Enfield's bonds were quoted at a small discount. Which of the following situations is the most likely cause of the decline in the bonds' market value?

Enfield is expected to call the bonds at a premium, which is less than Lee's carrying amount.

Enfield issued a stock dividend.

Interest rates have declined since Lee purchased the bonds.

Interest rates have increased since Lee purchased the bonds.