3. Interest rate spread Suppose that West bank currently charges a 2.5% fixed interest rate on a 15-year mortgage and pays a 2.0% interest rate to customers who buy 9- month CDs. Suppose that at the end of the nine-month period depositors roll over the funds in the CD for another nine months. Then the interest rate. spread is Suppose now that market interest rates increase by 0.4%. This means that West bank has to pay a mature, while charging interest rate on the 15-year mortgages. What will happen to the interest rate spread? It increases to 2.0 % and the West bank's interest income rises. It decreases to 0.1% and the West bank's interest income rises. It becomes equal to 2.4% and the West bank's interest income rises. It decreases to 0.1% and the West bank's interest income falls. interest rate on CDs when they