Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 14P
An American Depositary Receipt (ADR) is security issued by a U.S. bank and traded on a U.S. stock exchange that represents a specific number of shares of a foreign stock. For example, Nokia Corporation trades as an ADR with symbol NOK on the NYSE. Each ADR represents one share of Nokia Corporation stock, which trades with symbol NOK1V on the Helsinki stock exchange. If the U.S. ADR for Nokia is trading for $6.74 per share, and Nokia stock is trading on the Helsinki exchange for 6.20 € per share, use the Law of One Price to determine the current $/€ exchange rate.
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Students have asked these similar questions
An American Depositary Receipt (ADR) is defined as a security:(a) that has been deposited in an interest-bearing account at a U.S. bank(b) issued outside the U.S. that represents shares of a U.S. stock(c) issued in the U.S. that represents shares of a foreign stock(d) that has a guarantee of payment from a U.S. bank(e) issued in multiple countries but denominated in U.S. currency
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.
A. Only Factor 1 is correct
B.Only Factor 2 is correct
C.Both Factors are correct
D-Neither Factor is correct.
. An American Depositary Receipt is defined as a security:
A.
that has been deposited in an interest-bearing account at a U.S. bank.
B.
issued outside the U.S. that represents shares of a U.S. stock.
C.
issued in the U.S. that represents shares of a foreign stock.
D.
that has a guarantee of payment from a U.S. bank.
E.
issued in multiple countries but denominated in U.S. currency.
Chapter 3 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 3.1 - Prob. 1CCCh. 3.1 - If crude oil trades in a competitive market, would...Ch. 3.2 - How do you compare costs at different points in...Ch. 3.2 - Prob. 2CCCh. 3.3 - What is the NPV decision rule?Ch. 3.3 - Why doesnt the NPV decision rule depend on the...Ch. 3.4 - Prob. 1CCCh. 3.4 - Prob. 2CCCh. 3.5 - If a firm makes an investment that has a positive...Ch. 3.5 - Prob. 2CC
Ch. 3.5 - Prob. 3CCCh. 3.A - The table here shows the no-arbitrage prices of...Ch. 3.A - Suppose security Chas a payoff of 600 when the...Ch. 3.A - Prob. A.3PCh. 3.A - Prob. A.4PCh. 3.A - Prob. A.5PCh. 3.A - Consider a portfolio of two securities: one share...Ch. 3.A2 - Why does the expected return of a risky security...Ch. 3.A2 - Prob. 2CCCh. 3.A3 - Prob. 1CCCh. 3.A3 - Prob. 2CCCh. 3 - Honda Motor Company is considering offering a 2000...Ch. 3 - You are an international shrimp trader. A food...Ch. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - You have decided to take your daughter skiing in...Ch. 3 - Suppose the risk-free interest rate is 4%. a....Ch. 3 - You have an investment opportunity in Japan. It...Ch. 3 - Your firm has a risk-free investment opportunity...Ch. 3 - You run a construction firm. You have just won a...Ch. 3 - Your firm has identified three potential...Ch. 3 - Your computer manufacturing firm must purchase...Ch. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - An American Depositary Receipt (ADR) is security...Ch. 3 - Prob. 15PCh. 3 - An Exchange-Traded Fund (ETF) is a security that...Ch. 3 - Consider two securities that pay risk-free cash...Ch. 3 - Prob. 18P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Which of the following is a negotiable written promise (by a bank) for a U.S. dollar deposit at a bank located outside the United States or in U.S. International Banking Facilities.? a.Certificate of Deposits b.Bankers acceptances c.Eurodollar CD d.Repurchase agreementarrow_forwardWhy are foreign banks or insurance corporations cannot deposit securities with the SEC?arrow_forwardForeign currencies that are deposited in banks outside the home country are known as foreign bonds. Eurobond. Eurocurrencies. Eurodollars.arrow_forward
- Identify each transaction by whether it belongs in the US current account or financial account: The central bank of China collects interest payments on US government securities that it had previously bought. O Financial Account O Current Accountarrow_forwardExplain 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.arrow_forwardUnsponsored ADRs are created by a bank at the request of the foreign company that issues the underlying security. True or False?arrow_forward
- In the foreign exchange market, a ‘contract date’ is the expiry date of a forward contract. the date on which a futures contract is traded. the date on which two banks start a currency swap. the date on which a foreign exchange transaction is concluded.arrow_forward__________________________________ is a negotiable CD for a U.S. dollar deposit at a bank located outside the United States or in U.S. International Banking Facilities. Select one: A. Repurchase Agreements B. Eurodollar CD C. Foreign Deposits D. Treasury Billarrow_forwardA foreign-based company must use US GAAP if it wants to have its stock traded on a US stock exchange. Group of answer choices True Falsearrow_forward
- oreign currencies that are deposited in banks outside the home country are known as foreign bonds. Eurobond. Eurocurrencies. Eurodollars.arrow_forwardSecurities that are registered at the U.S. Federal level are not subject to U.S. state governments requiring their own registration because of _____________________. A. The Financial Institution Modernization ActB. SEC Rule 144AC. The Federal Reserve ActD. SEC Rule 415E. The National Securities Market Improvement Actarrow_forwardWhich of the following statements about the foreign exchange market is NOT true? The client market, also referred to as the retail market, is a segment of the FX market. FX brokers match buy and sell orders and carry a large inventory of foreign exchange. Nonbank dealers represent approximately 40% of the market. About 100-200 banks worldwide are prepared to make a market in foreign exchange.arrow_forward
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