Why Do the Values of ADRs Closely Track the Values

question 5

Multiple Choice

Why do the values of ADRs closely track the values of the underlying stock?

• A)If there is a discrepancy between the value of ADRs and the values of the underlying stock,arbitragers will quickly cause the values to converge.
• B)The only way to value ADRs is in relation to the values of the underlying stock.
• C)ADRs have no value except in relation to the underlying stock.
• D)Investors will not allow discrepancies between the values of ADRs and the values of underlying stock.

Understand the criticisms of regulatory policies.

Evaluate the outcomes of specific high-profile regulatory cases.

Distinguish between various forms of mergers and their legal status.

Recognize the roles of different regulatory and enforcement agencies.

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Definitions:

Permanent Income

The average annual income an individual expects to earn over their lifetime.

Fiscal Policy

A government's strategy for managing its budget, including taxation and spending decisions, to influence the economy.

Aggregate Demand Curve

A graphical representation showing the overall demand for goods and services in an economy at various price levels.

Discretionary Fiscal Policy

Fiscal policy based on judgment by policymakers rather than set by predetermined rules, aiming to influence demand through changing government spending and taxation.