Problem
In the EMS before September 1992 the lira/DM exchange rate could fluctuate by up to 2.25 percent up or down. Assume that the lira/DM central parity and band were set in this way and could not be changed. What would have been the maximum possible difference between the interest rates on one-year lira and DM deposits? What would have been the maximum possible difference between the interest rates on six-month lira and DM deposits? On three-month deposits? Do the answers surprise you? Give an intuitive explanation.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.