This issue can occur anywhere where the rich text editor is used - that's the feature with all the toolbar buttons for bold, italics, link, etc. You may run into this issue using the Text Module when creating a website page, posting news or events, or creating an assignment.
When this happens, just delete the entire word, words, or image you've been trying to use as a link, along with the surrounding spaces, and start again.
Sometimes the rich text editor will create a link but does not include the specified URL. So, no matter how many times you try, you can never create a working link. This is not something you can see unless you look at the source code.