On the day the Minister of Finance announced independence for the Bank of Taron along with a

boost in the base lending rate of one-quarter of a percentage point, the Taron stock market rose

1.4%, and Taron government bonds rose about 2.1%. The Tarony, Taron's currency, rose to

$1.7053 from $1.6211 and to DM2.9565 from DM2.8010. (20 marks)

a. Why did the Taron stock and bond markets react positively to the news?

b. Why did the Tarony appreciate on the news?

c. What was the Tarony's percentage appreciation against the U.S. dollar? Against the DM?

d. What was the percentage in the US dollar and DM?