Which of the following factors are related to an ADR? Factor-1: An ADR is a certificate that represents ownership of a foreign stock. An ADR is typically created by a U.S. bank who buys stock in foreign corporations in their domestic currencies and places them in its vault. Factor - 2: The major attraction to U.S. investors is that ADRs are claims to foreign companies that trade on domestic (U.S.) exchanges and in dollars. Only Factor 1 is correct 5.Only Factor 2 is correct C.Both Factors are correct D. Neither Factor is correct.

Which of the following factors are related to an ADR? Factor-1: An ADR is a certificate that represents ownership of a foreign stock. An ADR is typically created by a U.S. bank who buys stock in foreign corporations in their domestic currencies and places them in its vault. Factor - 2: The major attraction to U.S. investors is that ADRs are claims to foreign companies that trade on domestic (U.S.) exchanges and in dollars. Only Factor 1 is correct 5.Only Factor 2 is correct C.Both Factors are correct D. Neither Factor is correct.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Foreign exchange risk arises when: A)business transactions are denominated in foreign currencies. B)sales are made to customers in a foreign country. C)goods or services are purchased from suppliers in a foreign country. D)accounting reports are prepared in a foreign currency.
Which is the most simple way that is able to protect a U.S firm's earnings of its consolidated income statement in the depreciation of euro relative to U.S. dollar? A. Selling euros forward in the foreign exchange market. B. Partner with the local firm of the oversea market. C. Purchasing euros forward in the foreign exchange market. D. Establish a subsidiary in the oversea economy.
As used in international accounting, a “hedge” is: A)a business transaction made to reduce the exposure of foreign exchange risk. B)the legal barrier between the various divisions of a multinational company. C)the loss in US$ resulting from a decline in the value of the US$ relative to foreign currencies. D)one form of foreign direct investment.
Explain how a U.S. corporation could hedge net receivables in Malaysian ringgit with a forward contract. Explain how a U.S. corporation could hedge payables in Canadian dollars with a forward contract.
Credit entries in the U.S. balance of payments A. result from foreign sales of US. goods and services, goodwill, financial claims, and real assets B. result from U.S. purchases of foreign goods and services, goodwill, financial claims, and real assets give rise to the demand for dollars. give rise to the supply of dollars. C. D. The key strengths of the public corporation is/are their capacity to allow efficient risk sharing among many investors their capacity to raise large amounts of funds at relatively low cost their capacity to consolidate decision-making
Financial institutions engage in the purchasing and selling of foreign currencies for all of the following reasons except to: a. Hedge against foreign exchange exposures. b. Allow customers access to foreign markets to transact business. c. Avoid trading in speculative investments. d. Allow itself and/or customers to trade and invest in foreign financial markets.
5. Which of following activities dominates foreign exchange transactions a) multinational corporations buying and selling foreign exchange b) importers and exporters buying and selling foreign exchange c) banks buying and selling foreign exchange d) governments buying and selling foreign exchange
Assume that a U.S. company has a foreign subsidiary whose functional currency is the U.S. dollar. Explain how exchange rates between the foreign currency and the dollar would have to change in order to result in a current-year remeasurement loss and how the company could use a foreign currency loan receivable or payable to hedge against its net investment in the foreign subsidiary.
What is the so-called Norwalk Agreement?a. An agreement between the FASB and SEC to allow foreign companies to use IFRS in their filing of financial statements with the SEC.b. An agreement between the U.S. FASB and the U.K. Accounting Standards Board to converge their respective accounting standards as soon as practicable.c. An agreement between the SEC chairman and the EU Internal Market commissioner to allow EU companies to list securities in the United States without providing a U.S. GAAP reconciliation.d. An agreement between the FASB and the IASB to make their existing standards compatible as soon as practicable and to work together to ensure compatibility in the future.
what are the the foreign exchange exposure of a multinational company with it's headquarters in Jamaica and how can the company plan to manage this exposure.
What are some of the issues that arise in evaluating and maintaining control over foreign operations? Why might a company want its stock listed on a stock exchange outside of its home country? What would be the advantages of having a single set of financial reporting standards used worldwide?
Why do financial institutions engage in foreign exchange trading activities? Discuss the motivations with examples.

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