Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) Holders of the notes will be able to exercise their conversion rights prior to the Conversion Period, subject to certain  conditions, only under the following circumstances:  This transaction is accounted for under the accounting standard for convertible debt instruments that may be settled in  cash upon conversion (including partial cash settlement) and specifies that issuers of convertible debt instruments that may be  settled in cash upon conversion (including partial cash settlement) should separately account for the liability and equity  components in a manner that reflects the entity’ s nonconvertible debt borrowing rate when the interest cost is recognized in  subsequent periods. Our convertible notes fall within the scope of this standard due to our ability to elect to repay the  conversion premium in cash or shares.  We have determined that the embedded conversion option in the convertible notes is not required to be separately  accounted for as a derivative under the accounting standard for derivatives and hedging.  The carrying amount of the liability  component was calculated by measuring the fair value of a similar liability that does not have an associated equity component.  The carrying amount of the equity component, representing the embedded conversion option, was determined by deducting the  fair value of the liability component from the initial proceeds ascribed to the convertible notes as a whole.  The excess of the  principal amount of the liability component over its carrying amount is amortized as a component of interest expense over the  expected life of a similar liability that does not have an associated equity component using the ef fective interest method. The  equity component is not remeasured as long as it continues to meet the conditions for equity classification as prescribed in 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 an embedded feature) is indexed to an entity’ s own  stock.  Issuance and transaction costs incurred at the time of the issuance of the convertible notes are allocated to the liability  and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance  costs, respectively. The convertible notes are reflected on our consolidated balance sheets as follows:  __________________ (1)  Included within long-term debt and is being amortized over the life of the convertible notes.  (2)  Included within additional paid-in capital, net of capped call transactions and related issuance costs.  238 1.  During any calendar quarter after December 31, 2010 (and only during such calendar quarter), if the last reported  sale price of our common stock for each of at least 20 trading days (whether or not consecutive) during the 30  consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar  quarter, is greater than or equal to 130% of the applicable conversion price on each applicable trading day;  2.  During the five business day period after any five consecutive trading day period in which the trading price per  $1,000 principal amount of the notes (for each trading day during that measurement period) was less than  98% of  the product of the last reported sale price of the common stock and the applicable conversion rate on such trading  day; or  3.  Upon the occurrence of specified corporate events as described in the indenture for the notes.  December 31, (In thousands) 2012 2011 Liability component: Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 450,000 $ 450,000 Less: debt discount, net (1). . . . . . . . . . . . . . . . . . . . . . . (115,746 ) (133,502 ) Net carrying amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 334,254 $ 316,498 Equity component (net of tax impact) (2) . . . . . . . . . . . . $ 65,679 $ 65,679