CFA Level I · CFA Level I Exam · Equity Instrument Features
Relative to a direct investment in a foreign company's shares in its home market, an investor buying that company's depository receipts in the investor's own market is most likely to benefit from:
The investor benefits from trading and settling in the local market under local rules and in local currency. This lowers access barriers and costs. Currency exposure to the underlying shares still affects the DR's value, and voting rights are exercised through the depository bank.
- Aavoiding all exposure to the foreign company's currency.
- Btrading and settling in the local market under local rules and in local currency.Correct
- Creceiving the voting rights directly as a registered shareholder in all cases.
Explanation
DRs trade and settle locally in the local currency, reducing access barriers and costs. But the DR's value still reflects the underlying foreign share price and currency, so exposure remains, and voting is exercised through the depository.
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