The American Depository Receipts refer to certified and negotiable instruments issued by the American bank indicating the number of foreign shares that can be traded in the united states financial markets. Before the existence of American Depository Receipts, investors in the united states found it challenging to trade with foreign companies. These instruments have made it easy for investors in the united states and other developed nations to trade with foreign companies in the developing and the developed world. International investors essentially consider American Depository Receipts and Closed-end country funds to decide where to invest and where to purchase equity in a foreign company (Eun & Resnick, 2015) . Investors considering these approaches prefer them due to minimal transactional costs and increased convenience when making transactions.
I agree with the student that the closed-end country funds tend to provide a more comprehensive technique to international diversification and are available in many countries. There are, however, significant fees with a high risk of speculation. The major trade-off exists between evaluating the risks and the benefits. Further trade-offs exist between diversification and the costs of transactions involved. Spreading of risks between multiple investments is essential. The closed-end funds tend to have a limitation on the number of shares compared to the open end. Price discounts are significant benefits of closed-end funds. The closed-end funds tend to sell at either discounts or premiums. On the other hand, American Deposite Receipts are easily accessible and more comfortable to diversify. The process of opening trading accounts in foreign countries is complex and challenging.
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Closed-end country funds trade at a discount. I agree with the student that this is due to the nature of international speculation. When companies across the globe are expected to perform better, the fund is more likely to trade at a premium. However, the funds do not always represent the individual companies' accurate net asset value (O'Hagan-Luff & Berrill, 2019) . The close-end county funds trade at premiums, especially when the net asset value is below the stated price; on the other hand, they trade at a discount when the Net Asset Value is high than the specified price.
Reference
Eun, C. S., & Resnick, B. G. (2015). International financial management (7th ed.). Retrieved from https://redshelf.com/ .
O'Hagan ‐ Luff, M., &Berrill, J. (2019). The international diversification benefits of US ‐ traded equity products. International Journal of Finance & Economics , 24 (3), 1238-1253.
