Question

33. All the following statements are true for ADRs except:

	a.	they depend on exchange rate movements in addition to other factors
	b.	they are registered foreign securities traded in the U.S.
	c.	they are taxable securities
	d.	they always trade at a discount or premium over their original securities adjusted for exchange rates

32. To follow a top down approach to creating an emerging market investment portfolio, you:

a. include only the liquid, investable securities. b. first select the stocks that you wish to include based on their merits to outperform. c. first select the sectors that you wish to include based on their merits to outperform. d. first select the countries that you wish to include based on macroeconomic factors. e. none of the other choices are true

Answer 1

33: Option D :

ADRs are foreign securities registered with US banks for trading. They are taxable as well as their price depends on undelying basics as well as exchange rates.

However, they don't always trade at premium or discount rather tend to move towards the parity value of the original security. Hence option D is false.

34 : Option D :

Fund manager first decides to check the macroeconomic factors like political and social developments. Alos, level of employment and GDP trend is checked to see how one can benefit from those.

Stocks or sectors are not selected based on their merit to outperform but they are selected because the macroeconomic trends prefer them. This makes Option D correct.