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ADR/GDR – Objective Questions

Objective Questions

1. An instrument representing ownership interest in securities of a foreign issuer is referred to as
a. An ownership certificate.
b. A depositary receipt.
c. An ownership receipt.
d. None of the above.

2. Depositary receipts that are traded in an international market other than the United States are referred to as
a. Global depositary receipts
b. International depositary receipts.
c. Open market depositary receipts.
d. None of the above.

3. Issuance of DRs is based on the increase of demand in the
a. Local market.
b. International market.
c. Existing shareholders.
d. All of the above.

4. Each DR is backed by a specific number of an issuer’s local shares. This is referred to as the
a. DR ratio.
b. Issuer’s holding ratio.
c. Market holding ratio.
d. None of the above.

5. Which of the following does not constitute a benefit of DRs for the issuer?
a. Offer a new avenue for raising equity capital.
b. Broaden and diversify a company’s investor base.
c. Enhance a company’s visibility and status.
d. None of the above.

6. Which of the following does not constitute a benefit of DRs for investors?
a. Facilitate diversification into securities of foreign issuers.
b. Eliminate unfamiliar custody safekeeping arrangements.
c. Broaden and diversify the investment base.
d. None of the above.

7. ADRs that do not qualify or are not intended to be listed on stock exchanges are referred to as
a. Level 1 ADRs.
b. Level 2 ADRs.
c. Level 3 ADRs.
d. None of the above.

8. ADRs listed on stock exchanges are referred to as
a. Level 1 ADRs.
b. Level 2 ADRs.
c. Level 3 ADRs.
d. None of the above.

9. Which of the following is not an advantage of ADRs?
a. Cost-effectiveness.
b. Diversification of investment.
c, Reduction in administration cost.
d. None of the above.

10. Which of the following is not associated with the risk involved in ADRs?
a. Political risk.
b. Exchange rate risk.
c. Inflationary risk.
d. None of the above.

11. Level 1 is the most basic type of ADR where the foreign company
a. Wishes its ADR to be listed on the U.S. exchanges alone.
b. Does not wish its ADR to be listed on an exchange.
c. Does not wish its ADR to be listed on an U.S. exchange.
d. Wishes its ADR to be listed on any exchange around the world.
e. Wishes its ADR to be listed on any exchange other than U.S. exchanges.

12. Regulation S shares cannot be held or traded by any ______________, as defined by SEC Regulation S rules.
a. Non-U.S. person.
b. U.S. person.
c. European person.
d. U.S. investment firm.
e. Non-U.S. investment firm.

13. In ADR trading, when the investor places the buy order and when the broker executes the same, it becomes a binding contract between the investor and the
a. Foreign company.
b. Broker.
c. Securities Exchange Commission.
d. Stock exchange.
e. All the above.

14. The process of valuation of ADRs is known as portfolio valuation, when the market rate at the end of the period is determined from the
a. Primary stock exchange where the shares are traded.
b. Secondary market.
c. Prime broker.
d. Broker.
e. Credit rating companies.

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{ 2 comments… add one }

  • JYOTI November 10, 2014, 7:25 pm

    helpful

  • JYOTI November 10, 2014, 7:27 pm

    helpful to all student

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