Question

onds are considered to offer a guaranteed return, as they must be honored by law, but which is still a potential risk that investors face?

The issuer may not raise enough capital.
The issuer could refuse to pay dividends.
The issuer could go bankrupt.
The issuer may not make a profit.

Answer 1

The issuer could go bankrupt.

Even though bonds are legally obligated, the issuer can still default (e.g., enter bankruptcy) and fail to make scheduled interest or principal payments.