A consumer has $200 to spend on groceries and entertainment. The price of entertainment is $40 and the price of groceries is $20. 
Definitions:
Interest Expense
The cost incurred by an entity for borrowed funds, represented as a charge against earnings in the income statement.
Interest Payable
The amount of interest that has been incurred on borrowed funds that a company must pay, typically represented as a current liability on the balance sheet.
Effective Interest Method
An accounting technique used to allocate the interest expense of a bond evenly over its life, based on the bond's carrying value.
Premium Bond
A bond sold for more than its face value, where the bond's coupon rate is higher than the prevailing market rate of interest.
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