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I am Hispanic, so I obviously checked "yes" for that question and marked my designated ethnicity (PR).
But for the background, I was torn about what to do. The most accurate one was "White", but I didn't know where to go from there. I ended up checking "European" as best describing my background because I am fairly certain that somewhere far back my ancestors came to PR from Spain (I think my last name originated in Spain, although I have no documentation/proof that any of my ancestors actually came from Europe). This was really the only way I could think to answer the question. "South America" doesn't really apply to PR. Hopefully the way I answered is fine, and I am not worried how it will impact my chances any way because I want to know that I got in (hopefully I do get in) based on merit not ethnicity.
And just to clarify: I am not part Caucasian (in the sense that all of my grandparents grew up in PR not Europe and both my parents are 100% Hispanic), which was another source of confusion for me when I checked European.