An ADR (American Depository Receipt) is a negotiable certificate that represents

Question

An ADR (American Depository Receipt) is a negotiable certificate that represents stocks of a non-US company that is traded on US financial markets. Suppose the ADR of a British firm is convertible into five shares of stock. The share price per unit was GBP45 when the UK market closed. If the current spot rate is GBP/USD = 1.5500, the USD price of the ADR is:

a.USD 225.00

b. USD 348.75

c.USD 145.16

d. USD 69.75

The current USD/NOK spot exchange rate is 8.2320 while one year ago the same exchange rate was 6.1926. In relative value terms:

a.The USD has depreciated while the NOK has appreciated

b. The NOK has depreciated while the USD has appreciated

c.Both currencies have appreciated

d. Both currencies have depreciated

Explanation / Answer

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