SIE Exam Question 678: Answer and Explanation

Question: 678

Which of the following is a characteristic of American Depository Receipts (ADRs)?

• A. ADRs trade once per day like mutual funds.
• B. ADR holders receive foreign tax credits for income tax paid to a foreign country.
• C. ADR dividends are declared in U.S. dollars.
• D. ADRs allow domestic securities to be traded in foreign countries.

Correct Answer: B

Explanation:

ADRs allow for the trading of international securities in domestic countries. They trade throughout the day, and their dividends are declared in local currencies and paid in U.S. dollars. ADR holders receive foreign tax credits for income tax paid to a foreign country.