Explanation:

From an investor's perspective:

• Callable bonds have lower value than option-free bonds because the issuer can call the bond away when it's favorable to them (when rates decline), limiting the investor's upside.
• Putable bonds have higher value than option-free bonds because the investor can put the bond back to the issuer when it's favorable to them (when rates rise), providing downside protection.
• Option-free bonds have value between callable and putable bonds.

Therefore, the correct relationship is: Putable bond > Option-free bond > Callable bond

Option C is correct: the value of an option-free bond is higher than the value of a callable bond.