3. Interest rate spread Suppose that North bank currently charges a 3.5% fixed interest rate on a six-year auto loan and pays a 2.5% interest rate to customers who buy 6- month CDs. Suppose that at the end of the six-month period depositors roll over the funds in the CD for another six months. Then the interest rate spread is interest rate on CDs when they Suppose now that market interest rates increase by 0.4%. This means that North bank has to pay a mature, while charging interest rate on the six-year auto loans. What will happen to the interest rate spread? It increases to 2.5% and the North bank's interest income falls. It increases to 2.5% and the North bank's interest income rises. It remains the same and the North bank's interest income is unaffected. It decreases to 0.6% and the North bank's interest income falls. 3. Interest rate spread Suppose that North bank currently charges a 3.5% fixed interest rate on a six-year auto loan and pays a 2.5% interest rate to customers who buy 6- month CDs. Suppose that at the end of the six-month period depositors roll over the funds in the CD for another six months. Then the interest rate spread is interest rate on CDs when they Suppose now that market interest rates increase by 0.4%. This means that North bank has to pay a mature, while charging interest rate on the six-year auto loans. What will happen to the interest rate spread? It increases to 2.5% and the North bank's interest income falls. It increases to 2.5% and the North bank's interest income rises. It remains the same and the North bank's interest income is unaffected. It decreases to 0.6% and the North bank's interest income falls