# Question

Average annual interest rates (banks prime lending) in the United States from 1966 through 2009 are shown in the following time series graph.

a) What components do you see in this series? Here’s an autoregressive model with a 13-week lag fit to these data.

b) Does this model show that there is a (possibly unsuspected) 13-week seasonal cycle in interest rates? Explain.

c) Would you use this model to predict future gas prices? Explain.

a) What components do you see in this series? Here’s an autoregressive model with a 13-week lag fit to these data.

b) Does this model show that there is a (possibly unsuspected) 13-week seasonal cycle in interest rates? Explain.

c) Would you use this model to predict future gas prices? Explain.

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