Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) The following table sets forth total interest expense recognized related to the convertible notes for the periods indicated:  In connection with the November 2010 offering of the convertible notes, we also entered into capped call transactions  with an affiliate of Morgan Stanley & Co., Incorporated (“Morgan Stanley”), whose obligations have been guaranteed by  Morgan Stanley. The capped call transactions are intended to of fset the potential dilution to our common stock and/or any  potential cash payments that may be required to be made by us upon conversion of the notes in excess of the principal amount  of the notes, up to a stock price of approximately  $14.11 per share, which is the initial cap on the counterparty’ s share delivery  obligation under the call option. If, however , the market value per share of our common stock, as measured under the terms of  the capped call transactions, exceeds the applicable cap price of the capped call transactions, the number of shares of our  common stock and/or the amount of cash we expect to receive upon the exercise of the capped call transactions will be capped  and the anti-dilutive and/or of fsetting effect of the capped call transactions will be limited.  We paid approximately $46.1  million from the net proceeds from the issuance and sale of the convertible notes to purchase the capped call transactions.  The premium paid for the capped call transactions is recorded in additional paid-in capital in accordance with the  accounting standard for derivative financial instruments indexed to, and potentially settled in, an entity’ s own common stock  and the accounting standard for determining whether an instrument (or embedded feature) is indexed to an entity’ s own stock.  As noted above, the indentures for each of the Company’ s outstanding notes include provisions generally customary for  such securities. Furthermore, the indenture for the 2017 Convertible Senior Notes includes, among other terms, provisions  under which the bankruptcy of the Company or the appointment of a receiver for the Company or for certain of its subsidiaries  or other material assets would constitute an event of default under the indenture. Upon such a default, the note holders of the  2017 Convertible Senior Notes could declare the notes due and payable (which may , under certain circumstances, be  automatically accelerated), which would constitute an event of default under the indentures for the  5.375% Senior Notes due  2015 and the 9.000% Senior Notes due 2017 (which were issued in January 2013 as part of the Exchange Of fer). As described  in Note 1, certain events could cause our applicable insurance regulator to appoint a receiver for our insurance subsidiaries. If  this occurred, it would, unless waived by a majority of the note holders, constitute an event of default under the indenture for  the 2017 Convertible Senior Notes, and therefore, also cause an event of default under the indentures for the 5.375% Senior  Notes due 2015 and the 9.000% Senior Notes due 2017 (which were issued in January 2013).  239 December 31, 2012 2011 ($ in thousands) Contractual interest expense. . . . . . . . . . . . . . . . . . . . . $ 13,500 $ 13,500 Amortization of debt issuance costs. . . . . . . . . . . . . . . 1,094 1,039 Amortization of debt discount. . . . . . . . . . . . . . . . . . . 17,756 16,131 Total interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,350 $ 30,670 Effective interest rate of the liability component . . . . . 9.75% 9.75%