1.8.0 - AMERICAN DEPOSITORY RECIEPTS

How does an ADR work?

An ADR is a negotiable security that represents a receipt for shares of stock in a non-U.S. corporation, usually from 1 to 10 shares.

Which of the following taxes does NOT impact the holder of an ADR? A) Federal income tax. B) State income tax. C) Excise tax. D) Foreign income tax.

C) Excise tax. Dividends on ADRs are subject to both federal and state income tax. In addition, the country of origin will frequently levy a tax which may be used as a credit on the investor's federal income tax return. Reference: 1.8 in the License Exam Manual

TRUE OR FALSE? ADRs are bought and sold in the U.S. securities markets like stock.

TRUE

What does ADRs stand for?

American Deposit Receipts

An ADR is used to: A) sweeten a bond offering. B) facilitate trading U.S. securities in foreign markets by U.S. citizens living abroad. C) finance foreign trade in which U.S. citizens are engaged. D) facilitate trading foreign securities in U.S. markets by U.S. citizens living in the United States.

D) facilitate trading foreign securities in U.S. markets by U.S. citizens living in the United States. American depositary receipts (ADRs) make trading in foreign securities easier in U.S. markets for U.S. investors. Reference: 1.8 in the License Exam Manual

What are ADRs?

U.S. securities that facilitate the trading of foreign stocks in the U.S. markets.