El Salvador Has Dollarized; That Is, It Uses the U

question 67

Multiple Choice

El Salvador has dollarized; that is, it uses the U.S. dollar as its currency. What is the backing ratio for El Salvador's currency?

• A) 0%
• B) 25%
• C) 75%
• D) 100%

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Definitions:

Beta Coefficient

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates more volatility than the market.

One-Factor APT

A model that describes financial markets and attempts to predict the returns of securities with a single factor, usually related to economic risk.

Standard Deviation

A measure of the dispersion of a set of data from its mean, indicating volatility.

Factor Portfolio

A portfolio constructed to have a specific sensitivity to certain underlying factors that are expected to influence returns, such as size, value, or momentum.