American Depository Receipts (ADRs)

Question 1

American Depository Receipts (ADRs)

Answer 1

are a popular way to get exposure to international stocks without the potential headaches and work associated with direct investing.

Question 2

ADRs are traded on

Answer 2

U.S. exchanges

Question 3

ADRs allow investors to avoid many of the costs and inconveniences associated with trading on a foreign exchange, such as

Answer 3

1) currency exchange rates,
2) foreign regulations
3) commissions

Question 4

ADRs are subject to

Answer 4

currency risk (also called exchange rate risk)

Question 5

A bank in the U.S. purchases the issuing company’s shares in the issuer’s home country. This U.S. bank is called the

Answer 5

depository bank

Question 6

he depository bank deposits the purchased shares in a bank located in the issuer’s country, called the

Answer 6

custodian bank

Question 7

The depository bank then issues ADRs, which represent the shares held in the custodian bank, and sells them in

Answer 7

U.S. Market

Question 8

ADRs are subject to currency risk because when the price of the U.S. dollar goes up, the price of the ADR will fall in

Answer 8

U.S. dollar

Question 9

. But ADRs can also provide protection against a decline in the U.S. dollar—when the U.S. dollar falls, the price of the ADR

Answer 9

increases