ADRs and Exchange Rate
Course: Investment Planning
Lesson 4: International Equity Securities
Student Question:
Is it not true that ADRs eliminate currency risk because transactions are done in USD?
Lafe
Instructor Response:
Great question Lafe.
ADRs do not guarantee exchange rates; they merely exchange foreign currency to US$ as a convenience to ADR investors.
Changes in the exchange rate are reflected in the market price of the ADR.
Hope that helps!
Bruce
← Practice Question: Correlation between International Stocks and T-BillsCFP® Certificants in the News: Dangerous Misconceptions About A CFP® Certificant’s Duty to Disclose Material Conflicts of Interest →
