Which nonharmonic tone steps above or below the chord tones?

The choice of Neighbor Tone is correct because it specifically refers to a nonharmonic tone that is approached by step from a chord tone and then resolves back to that chord tone, either above or below it. This characteristic of moving stepwise away from a chord tone and returning makes the Neighbor Tone distinct within the context of nonharmonic tones.

In contrast, a Passing Tone connects two chord tones by stepping between them, but it does not return directly to the same tone it originated from; rather, it continues to the next chord tone. A Suspension involves holding onto a note from the previous chord while the harmony changes, typically resolving downwards, but it does not move away from the chord tone in the manner that a Neighbor Tone does. Diminution is not a type of nonharmonic tone; instead, it refers to a decorative technique or rhythmic variation rather than a specific tonal relationship.