The chance that a company will be unable to make the coupon or the principal payments on its debt obligation is called default risk . Which one of the following statements is correct ? Bond rating measures a bond's default risk . The lower the rating , the higher the default risk . O B. Bond rating is given by a rating agency solely based on the issuer's financial information with no consideration of bond characteristics . Protective covenants help the issuer to facilitate the process of bankruptcy . It protects the issuer of the bond against default risk . OD unsecured bond is considered as safe as senior secured bond .