Which factors are critical when assessing bond investment risks?

When assessing bond investment risks, interest rate risk, credit risk, and inflation risk are indeed critical factors.

Interest rate risk refers to the potential for bond prices to decrease as interest rates rise. Since bonds pay a fixed interest rate, when market interest rates increase, new bonds are issued at higher rates, making existing bonds with lower rates less attractive. This relationship causes the price of existing bonds to fall in order to adjust yields to new market conditions.

Credit risk, also known as default risk, pertains to the possibility that the bond issuer may fail to make required payments or default on the obligation. Evaluating the creditworthiness of a bond issuer involves looking at their financial stability and history of repayment, which is crucial for determining the risk associated with investments in corporate and municipal bonds.

Inflation risk addresses the risk that inflation may erode the purchasing power of the interest payments and principal received from the bond. If the inflation rate is higher than the yield on the bond, the investor effectively loses money in real terms. Therefore, investors must consider expected inflation when making investment decisions.

The other options involve factors that are not primary risks associated directly with bond investments. Weather patterns and marketing trends, for example, may affect certain sectors, but they aren't directly tied to