SIE practice questionhardADRs
What is the primary risk for U.S. investors who own ADRs?
- AVoting rights at all annual meetings
- BNo access to company financial statements
- CCurrency risk due to fluctuations in exchange rates✓ Correct answer
- DAutomatic tax exemption on foreign income
Explanation
Why C — Currency risk due to fluctuations in exchange rates
ADRs expose U.S. investors to currency risk if the foreign currency weakens against the dollar. ADR holders may still access company information, usually have limited voting rights, and are subject to taxes.
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