Question

Which of the following isincorrect?

I.American Depository Receipts (ADRs), are certificates issued by U.S. banks and traded in foreign markets that represent ownership in shares of a foreign company.

II.Repurchase agreements have high credit risk.

III.The face value and coupon of TIPS are adjusted in proportion to increases in the Consumer Price Index (CPI).

IV.Until 2018, corporations could exclude 40% of dividends arising from preferred stocks owned in domestic corporations.

A.III

B.I and II

C.I, II, and IV

D.II and IV

Answer 1

D.II and IV

IV.Until 2018, corporations could exclude 40% of dividends arising from preferred stocks owned in domestic corporations.

II.Repurchase agreements have high credit risk.

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price. That small difference in price is the implicit overnight interest rate. Repos are typically used to raise short-term capital. They are also a common tool of central bank open market operations.