Question

The custodial bank (located in the home country of the issuer) of an American Depository Receipt

a. Buys and sells the foreign shares based upon their inside information

b. Performs trading outside the U.S. on behalf of the ADR holders

c. Performs trading in the U.S. on behalf of the ADR holders

d. Holds foreign shares on deposit

e. Acts as a broker between U.S. investors and the foreign firm

Answer 1

The correct answer is option (d)

Step-by-step explanation:

Solution

From the given question, A custodial bank that is located in the home country of the issuer of an American Depository Receipt is described as follows:

Generally, a custodian is a bank or a financial institution or bank that keeps financial securities such as bonds, stocks, gold etc. basically, custodians are involved in having the custody of shares/securities. They might be some banks who are holding on to this securities.

Answer 2

Answer: c. Performs trading in the U.S. on behalf of the ADR holders

Step-by-step explanation:

depository receipt are issued to individuals, investors or companies as a symbol of an ordinary shares to global investor, by keeping the shares under the custody of a 'Domestic Custodian Bank'. Domestic Custodian Bank is a bank that’s specialized in and responsible for safeguarding a firm's or individual's financial assets. This assets are usually traded in domestic market or what is known as local market that is only within the USA stock exchange.