Series 7 practice questioneasyEquity Securities 3
An ADR is most useful to a U.S. investor because it:
- Aallows trading of foreign shares in U.S. markets and dollars✓ Correct answer
- Bguarantees the foreign issuer against currency risk
- Celiminates political risk in the issuer’s home country
- Dconverts common stock into debt
Explanation
Why A — allows trading of foreign shares in U.S. markets and dollars
American Depositary Receipts allow U.S. investors to buy interests in foreign issuers more conveniently through U.S. trading and settlement systems. They do not eliminate currency, market, or political risk.
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