What is the difference between INTEREST PAYMENT and INTEREST INCOME?

CFA Level II FRA
#1

Can’t tell the difference between

  1. Interest payment

  2. Interest income

#2

Interest payment is expense incurred and is associated with borrowing of funds (liability).

Interest income is income earned and is associated with lending of funds (assets).

In the financial statements of banks, interest expense is the result of deposits from customers, while interest income is the result of loans to customers.

#3

Interest Payment = Coupon * Par Value

Interest Income = Effective Yield * Cost of Bond