Which of the following risk factors generally affects bond investments the most?

The creditworthiness of the issuer is a critical factor that directly impacts bond investments because it assesses the issuer's ability to meet its debt obligations. When investors evaluate bonds, they pay close attention to the issuer's credit rating, which reflects the risk of default. If an issuer is deemed higher risk—perhaps due to financial instability or poor management—investors will expect a higher yield to compensate for that risk. Conversely, if the issuer has a strong credit rating, the bond may be perceived as a safer investment, resulting in a lower yield.

This credit risk is particularly significant because it can affect not only the price of the bond in the secondary market but also the likelihood of receiving interest payments and the return of principal at maturity. Changes in the issuer's creditworthiness can lead to fluctuations in bond prices, impacting overall investment returns more so than factors related to equity markets or other securities.

In contrast, while the market price of underlying stocks and the liquidity of the stock market can affect perceptions of investment risk, they are more relevant to equity investments rather than bonds. Additionally, the amount of cash dividends paid is specific to stocks and does not apply when discussing bond investments, as bonds provide interest payments rather than dividends. Thus, the creditworthiness of the issuer is