Q:
Which of the following best describes American Depository Receipts (ADRs)?
a) An option to purchase a stated number of shares of a common stock at a stated price
b) Trade foreign securities in U.S. markets
c) Trade U.S. securities in foreign markets
d) Fixed income security portfolio managed by a corporate trustee
A:
The correct answer is b):
ADRs are used to trade foreign securities in the United States. Instead of buying shares of foreign companies in the overseas markets, investors can buy shares in the U.S. in the form of ADRs. This entitles the investor to capital gains/losses and dividends, but it does not eliminate currency risks.

RELATED FAQS

  1. How are American Depository Receipts (ADRs) exchanged?

    Learn specifics about American depositary receipts, including how they are exchanged and some of their advantages and disadvantages.
  2. Why are big foreign companies considering delisting their American depositary receipts?

    American depositary receipts (ADRs) were developed to give investors an easier way to invest in foreign companies. An ADR ...
  3. What are the differences between Levels I, II, and III American Depository Receipts ...

    Understand the difference between sponsored American depositary receipts categorized within Level I, II or III.
  4. How are American Depository Receipts (ADRs) priced?

    Understand what American depositary receipts are and how they work, including how the price of ADRs is determined by the ...
  5. Is there a difference between ADR and ADS?

    American depositary receipts (ADRs) allow foreign equities to be traded on U.S. stock exchanges; in fact, this is how the ...
  6. How does a depository bank benefit from issuing an ADR for a foreign company for ...

    For domestic investors the benefits of increasing the portion of their portfolio that they invest in foreign companies is ...
RELATED TERMS
  1. American Depositary Receipt - ADR

    A negotiable certificate issued by a U.S. bank representing a ...
  2. Sponsored ADR

    An American depositary receipt (ADR) issued by a bank on behalf ...
  3. Guilder Share - New York Share

    An ownership stake in a Dutch company that can be traded in the ...
  4. Depositary Receipt

    A negotiable financial instrument issued by a bank to represent ...
  5. SEC Form F-6

    A filing with the Securities and Exchange Commission (SEC) required ...
  6. Global Registered Share

    A share issued and registered in multiple markets around the ...
Hot Definitions
  1. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  2. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  3. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  4. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  5. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
  6. Merchandising

    Merchandising is any act of promoting goods or services for retail sale, including marketing strategies, display design and ...
Trading Center