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The type of credit risk that is most directly reflected in a bond’s rating is:

A default risk.

Default risk is the possibility that the issuer will fail to meet its obligations under the indenture, for which investors demand a premium above the return on a default-risk-free security. Bond ratings indicate default risk. Downgrade risk is the risk that a bond will be reclassified as a riskier security by a credit rating agency. Credit spread risk is the risk that the default risk premium on a bond can increase.

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