Question

The ADR of a British firm is convertible into 3 shares of stock. The share price of the firm was 30 pounds when the British market closed. When the U.S. market opens, the pound is worth 1.63. The price of this ADR should be____?

1) 48.90
2) 146.70
3) 55.21
4) None of these are correct.

Answer 1

The price of the ADR for a British firm convertible into three shares of stock, with the pound valued at $1.63, should be $146.70.

Step-by-step explanation:

The question is asking for the U.S. dollar price of an ADR (American Depositary Receipt) of a British firm when the pound is worth $1.63. The ADR is convertible into three shares of the firm's stock, and the stock price was 30 pounds when the British market closed. To calculate the price of this ADR, you would first determine the total value of the three shares in pounds, which is £90 (3 × £30), and then convert this into U.S. dollars by multiplying by the exchange rate of $1.63 per pound.

So, the calculation would be £90 × $1.63 = $146.70. Therefore, the price of this ADR should be $146.70.