Correct answer: D. Both

• Statement I is true: a make-whole call price is based on the present value of remaining cash flows discounted at a Treasury-based rate, so when Treasury rates fall, the make-whole price rises, and when rates rise, it falls.
• Statement II is true: relative to a fixed-price call, a make-whole call is more protective of bondholders, so the issuer must effectively provide more compensation for the call privilege.

Therefore, both statements are true.