A major risk facing bondholders, for example, is interest rate risk the uncertainty associated with fluctuating interest rates. That is, they are sold at a discount. Another type of risk faced by bondholders is default risk the risk that the issuer will fail to pay the specified interest payments or the principal at the promised time. To help investors evaluate the risk of default, many bonds are evaluated by various rating systems, such as those by Moody or Standard and Poor. In fact, a Standard and Poor rating of D indicates a bond that is already in default.
Bondholders also face maturity risk.
It is much more difficult to predict the investing environment over a longer period of time. Yield or return is another important consideration when looking at bonds. This text was extracted from the publication, MF2082.