Glossary 639Risk-free rate:The rate of return available in the market on an investment free of
default risk.
Risk premium:A rate of return in addition to a risk-free rate to compensate the in-
vestor for accepting risk.
Road show:A trip, generally of two or more weeks’ duration, by under writers and
company management to meet with underwriters, brokers, and investors in different
cities in order to explain a proposed public offering of securities.
Roll over:To enter a new future or for ward contract to replace a contract that is
expir ing.
ROM: Read-only memory are forms of data storage which cannot be written to (or
changed), but from which data can only be retrieved. A music CD (and, hence, CD
ROM) is a device from which you can play back music, but you cannot record your
own music to a CD ROM. (If you canrecord to a CD, the device is called a CD-R
(for recordable), not a CD ROM.)
Securities Act of 1933:The U.S. statute that permits the private placement or pri-
vate sale of securities without registration provided full and fair disclosure is made
and that requires the registration of public offerings of securities.
Securities and Exchange Commission (SEC):An agency of the U.S. government
which regulates the public issuance of securities under the Securities Act of 1933
and the conduct of trading markets and brokerage firms under the Securities Ex-
change Act of 1934, so as to protect investors from fraud and misleading or inade-
quate corporate and financial information.
Securities Exchange Act of 1934: The U.S. statute which established the Securi-
ties and Exchange Commission and regulates the operation of broker/dealers. Under
this statute, companies with publicly held securities are required to make periodic
reports to the public on various forms, most typically Forms 10-K, 10-Q, and 8-K. Of-
ficers, directors, and significant shareholders of publicly held companies are required
to report purchases and sales of securities and the formation of “groups” for the hold-
ing, voting, purchase, or sale of publicly traded securities.
Short:To enter a future or for ward as the short party. Also known as “selling” the
future or for ward.
Short party:The party in a for ward or future contract that will deliver the under-
lying asset and receive payment (i.e., the selling party). The party in a for ward or fu-
ture contract that benefits from a decline in the price of the underlying asset.
Single-step income statement:An income statement format that simply deducts
expenses and losses from revenues and gains in arriving at a single measure of income
from continuing operations.
Speculate:Attempt to profit by taking on a risk exposure.
Spot market:The market in which transactions are executed for immediate deliv-
ery of an asset.
Spot price:The price to be paid for immediate delivery of an asset or commodity.
Spot rate:Rate at which currencies are exchanged for immediate delivery.
Standard and Poor’s 500: A stock portfolio consisting of 500 large corporations.
The composition and value of the stock portfolio is tracked and reported by the Stan-
dard and Poor ’s publishing company. The S&P 500 value is widely used as a bench-
mark index of overall stock market performance.