TeachMeFinance.com - explain Participating bond
Participating bond -- Comparable to an income bond inasmuch
as the return to the holder in interest depends on the
extent of the revenues so applicable.
The first bonds to bear this name were issued in 1902 and v/ere designated "4 per cent and participating bonds." These
bonds were in effect collateral as well as income bonds. The
company which issued the bonds owned stock in another company
and this stock was deposited and pledged as security for
the principal of the bonds. Interest at 4 per cent was guaranteed
by the company which issued the bonds and the bonds
were also entitled to receive interest in excess of 4 per cent
as permitted by the dividends paid on the stock securing the
bonds beyond the amount necessary first to provide for the 4
per cent as guaranteed.
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