SIE practice questionmediumADRs
An investor receives dividends on an ADR. What is a possible additional consideration compared to dividends from U.S. stocks?
- AForeign taxes may be withheld from the dividend.✓ Correct answer
- BDividends are never paid in cash.
- CADR holders have more voting rights than common stockholders.
- DDividends are paid in the foreign company’s currency directly.
Explanation
Why A — Foreign taxes may be withheld from the dividend.
Foreign governments may tax dividends before payment to U.S. ADR holders. ADR dividends are paid in U.S. dollars, and voting rights are typically limited.
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