Systematic Risk
Currency risk is a concern for investors holding:
ADRs = foreign stocks in dollar form. Still have currency and political risk.
Complete Analysis & Legal Rationale
ADRs represent foreign stocks and involve currency risk because the underlying shares are denominated in a foreign currency. Changes in exchange rates affect ADR values.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
U.S. Treasuries are in dollars; no currency risk for U.S. investors.
Domestic corporate bonds are in U.S. dollars.
Matches the verified teaching point in the explanation.
Municipal bonds are issued and paid in U.S. dollars.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.