CFA Level I · CFA Level I Exam · Equity Instrument Features
An investor in Country X wants exposure to a company listed only in Country Y without opening a foreign brokerage account and trading in the foreign currency. The investor is most likely to choose:
The investor would most likely choose a depository receipt traded on a local exchange. It represents the foreign company's shares, is quoted in local currency, and settles through local market infrastructure, so no foreign brokerage account or direct foreign currency trading is required.
- Aa depository receipt traded on a local exchangeCorrect
- Ba direct purchase on the Country Y exchange
- Ca private placement of the foreign shares
Explanation
A depository receipt is issued by a depository bank, represents shares of a foreign company, and trades locally in the local currency. This avoids the foreign account and currency conversion. A direct purchase requires both, and a private placement is not a way of avoiding them.
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