Question

ADRs:

I. are shares of U.S. companies traded on foreign exchanges.
Il. are shares of foreign companies traded on U.S. exchanges.
IlI. pay dividends in U.S. dollars if they pay dividends.
IV. are subject to exchange rate risk.

A) I and Il only
B) Il and Ill only
C) II. IlI and IV only
D) 1, II, IIl and IV

Answer 1

ADRs are shares of foreign companies traded on U.S. exchanges, pay dividends in U.S. dollars, and are subject to exchange rate risk. The correct answer to the question is 'C) II. III and IV only', as ADRs are not shares of U.S. companies traded on foreign exchanges.

Step-by-step explanation:

ADRs, or American Depositary Receipts, are a way for investors to own shares in foreign companies while trading in U.S. financial markets. The correct statements about ADRs are:

• Shares of foreign companies traded on U.S. exchanges.
• They pay dividends in U.S. dollars if they pay dividends.
• Subject to exchange rate risk because their value is tied to the performance of the underlying foreign shares, which is converted to U.S. dollars.

Based on these points, the correct answer is C) II. III and IV only.

ADRs do not represent shares of U.S. companies on foreign exchanges, which addresses the inaccuracy in option I.