What is considered one of the most significant risks associated with bonds?

Credit and interest rate risk are indeed considered significant risks associated with bonds.

Credit risk refers to the potential that a bond issuer may default on their obligations, meaning they may fail to pay interest or repay the principal when it matures. Investors need to assess the creditworthiness of the issuer, as a lower credit rating indicates a higher likelihood of default.

Interest rate risk is associated with the impact of rising interest rates on bond prices. When market interest rates increase, the prices of existing bonds typically decrease. This is because new bonds are likely issued at higher rates, making the older bonds less attractive. As a result, if an investor needs to sell their bond before maturity, they might have to do so at a lower price than what they initially paid.

Both risks can significantly affect the returns from bond investments, making them crucial for investors to consider. While liquidity risk, market risk, and country risk are also relevant factors in investing, the combined effects of credit and interest rate risks are particularly prominent when discussing bonds, making this choice the most comprehensive answer regarding the risks associated with this type of investment.