SIE (Securities Industry Essentials) Practice Exam 2025 - Free SIE Practice Questions and Study Guide

Duration is the correct measure of sensitivity of a debt portfolio to changes in interest rates because it measures the weighted average time to receive the cash flows from the underlying debt securities. This means that it takes into consideration not only the size of the interest rate changes but also the timing of the cash flows. Options A, C, and D are incorrect because they do not specifically measure interest rate sensitivity. Volatility (option A) measures the degree of fluctuation of the portfolio's return, while liquidity (option C) measures the ease with which the portfolio can be bought or sold. Credit risk (option D) measures the risk of default on the underlying debt securities. While these factors may indirectly affect the sensitivity of a debt portfolio to interest rate changes, they are not specific measures of interest rate sensitivity. Therefore, option B, duration, is the most accurate and relevant measure for this purpose.