medium · Investment Banking

Which of the following describes the 'If-Converted' method for treating convertible bonds in the calculation of Diluted Shares Outstanding?

1. It assumes the company uses the after-tax interest savings on the bonds to repurchase shares on the open market.
2. It excludes the convertible bonds whenever the conversion price is below the current share price.
3. It only counts additional shares once bondholders formally submit a signed notice of conversion.
4. It assumes the bonds are converted into equity at the beginning of the period if they are in-the-money.

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