Answer (A) is correct . Ownership rights in foreign corporations are sometimes evidenced by American Depository Receipts (ADRs). The foreign stocks are deposited with a large U.S. bank, which in turn issues ADRs representing ownership in the foreign shares. The ADR shares then trade on a U.S. stock exchange, whereas the company’s original shares trade in foreign stock markets. ADRs allow foreign companies to develop a U.S. shareholder base without being subject to many SEC restrictions.
Answer (B) is incorrect because The purpose of an ADR is to allow Americans to invest abroad.
Answer (C) is incorrect because ADRs are designed to allow foreign firms to raise capital in the U.S.
Answer (D) is incorrect because ADRs are securities issued by American banks acting as custodians of shares of foreign firms.
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