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 ? Suppose now that market interest rates increase by 0.4%. This means that North bank has to pay a (Higher, lower, the same) interest rate on CDs when they mature, while charging (Higher, lower, the same) interest rate on the six -year auto loans. What will happen to the interest rate spread? (choose 1) It decreases to 0.6% and the North bank's interest income rises. It becomes equal to 2.9% and the North bank's interest income rises. It increases to 2.5% and the North bank's interest income falls. It decreases to 0.6% and the North bank's interest income falls.
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 ? Suppose now that market interest rates increase by 0.4%. This means that North bank has to pay a (Higher, lower, the same) interest rate on CDs when they mature, while charging (Higher, lower, the same) interest rate on the six -year auto loans. What will happen to the interest rate spread? (choose 1) It decreases to 0.6% and the North bank's interest income rises. It becomes equal to 2.9% and the North bank's interest income rises. It increases to 2.5% and the North bank's interest income falls. It decreases to 0.6% and the North bank's interest income falls.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
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 ?
Suppose now that market interest rates increase by 0.4%. This means that North bank has to pay a (Higher, lower, the same) interest rate on CDs when they mature, while charging (Higher, lower, the same) interest rate on the six -year auto loans.
What will happen to the interest rate spread? (choose 1)
It decreases to 0.6% and the North bank's interest income rises.
It becomes equal to 2.9% and the North bank's interest income rises.
It increases to 2.5% and the North bank's interest income falls.
It decreases to 0.6% and the North bank's interest income falls.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education