The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels. The holder of the bond may exchange it for stock of the corporation. This bond would be a convertible participating bond.
Step-by-step explanation:
A Convertible participating bond is a stock portfolio that, in addition to the preferred dividend, grants owners the right to claim surplus earnings (along with shareholders).
A convertible bond has become a fixed-income debt instrument that pays interest but can be exchanged to a specified number of common stocks or shareholdings. At certain periods during bond tenure, the conversion between bond to stock is performed and typically at bondholder's choice.