Consider the average annual interest rates on 30-year fixed mortgages in the United States. The data are recorded in the file P02_21.xlsx.
a. Specify one or more promising auto regression models based on autocorrelations of this time series. Estimate each model with the available data. Which model provides the best fit to the data?
b. Use the best auto regression model from part a to produce forecasts of the average annual interest rates on 30-year fixed mortgages in the next three years.