What primary advantage do ADRs offer to U.S. investors?

What primary advantage do ADRs offer to U.S. investors?

• A. Exposure to foreign currencies
• B. Simplified access to foreign stocks
• C. Guaranteed dividends from foreign companies
• D. Reduction in tax obligations

Answer: (B)

The primary advantage that American Depositary Receipts (ADRs) offer to U.S. investors is simplified access to foreign stocks. ADRs are financial instruments that represent shares in foreign companies and are traded in U.S. dollars on U.S. exchanges. This structure allows investors to invest in foreign companies without the need to navigate the complexities of international trading and currency exchanges. By holding ADRs, U.S. investors can easily buy, sell, and receive dividends from foreign companies as if they were dealing with domestic stocks. This accessibility encourages diversification of investment portfolios by providing an efficient means for investors to gain exposure to global markets while adhering to U.S. regulatory standards. While exposure to foreign currencies might occur through the underlying assets, ADRs themselves are dollar-denominated, which adds a layer of convenience for investors. The notion of guaranteed dividends is misleading; dividends are not guaranteed and depend on the financial performance of the underlying foreign company. Tax obligations can vary and might not necessarily be reduced by investing in ADRs, as capital gains and income might still be subject to taxation based on U.S. law. Overall, the key benefit of ADRs is that they streamline the process for U.S. investors to invest in international businesses, making global investing more accessible

The primary advantage that American Depositary Receipts (ADRs) offer to U.S. investors is simplified access to foreign stocks. ADRs are financial instruments that represent shares in foreign companies and are traded in U.S. dollars on U.S. exchanges. This structure allows investors to invest in foreign companies without the need to navigate the complexities of international trading and currency exchanges.

By holding ADRs, U.S. investors can easily buy, sell, and receive dividends from foreign companies as if they were dealing with domestic stocks. This accessibility encourages diversification of investment portfolios by providing an efficient means for investors to gain exposure to global markets while adhering to U.S. regulatory standards.

While exposure to foreign currencies might occur through the underlying assets, ADRs themselves are dollar-denominated, which adds a layer of convenience for investors. The notion of guaranteed dividends is misleading; dividends are not guaranteed and depend on the financial performance of the underlying foreign company. Tax obligations can vary and might not necessarily be reduced by investing in ADRs, as capital gains and income might still be subject to taxation based on U.S. law.

Overall, the key benefit of ADRs is that they streamline the process for U.S. investors to invest in international businesses, making global investing more accessible