medium · Investment Banking implied-share-price
Under the Net Share Settlement (NSS) method for convertible bonds, what portion of the principal is added to the diluted share count?
- The principal is treated as pure equity whenever the convertible bond happens to be in-the-money.
- Only the saved interest expense is added to the diluted EPS numerator calculation.
- None; only the in-the-money value is settled in shares, while the principal is paid in cash.
- The entire bond principal converts into common shares at the stated conversion price under this method.
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