The risk associated with Firm A's bond is greater than the risk of Firm B's bond. All other things being equal, investors would be willing to pay for Firm B's bond.

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Explanation:

Bonds refer to debt instruments whereby the issuer raises long term capital , thereby agreeing to pay the lender, a fixed rate of coupon payments annually and principal repayment at the end of the term.

Bonds arrive with credit ratings and AAA rated is usually considered the best rating. It denotes credit worthiness based upon repayment history of the borrower. The higher the credit rating, the less risky the bonds are.

In case of two bonds, wherein one bond is riskier than the other, the bond which is less riskier will be more opted for and thus, the investors would be willing to pay more for such a bond since their money would be secure and less chances of borrower making a default.

Hence, in the given case, investors will be willing to pay more for Firm B's bond which are less riskier.

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b is the correct answer