On the day that the Chancellor of the Exchequer announced independence for the Bank of England along with a boost in the base lending rate of one-quarter of a percentage point, the British stock market rose 1.4%, and British gilts rose about 2.1%. The pound rose to $1.6333 from $1.6223 and to DM2.8165 from DM2.8006.

a. Why did the British stock and bond markets jump on the news?

b. Why did the British pound appreciate on the news?

c. What was the pound’s percentage appreciation against the U.S. dollar?

d. What was the pound’s percentage appreciation against the DM?