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. Why would an investor want to hold an American Depository Receipt rather than the ...

    Learn about the advantages for investors of using American Depositary Receipts instead of investing directly in the underlying ...
  2. What factors must a company consider before establishing an American Depository Receipt ...

    Learn which factors a foreign company must consider before establishing an American Depository Receipt, or ADR, program in ...
  3. 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.
  4. 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 ...
  5. 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.
  6. 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 ...
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. Y

    A letter that appears on a Nasdaq stock symbol specifying that ...
  4. Depositary Receipt

    A negotiable financial instrument issued by a bank to represent ...
  5. Unsponsored ADR

    An American depositary receipt (ADR) issued by a depositary bank ...
  6. SEC Form F-6EF

    A filing with the Securities and Exchange Commission (SEC), also ...

You May Also Like

Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center