Question: Consider a portion of monthly return data on 20-year Treasury Bonds from 2006-2010. Year................ Month................ Return (%) 2006.................... Jan........................ 4.65 2006.................... Feb........................ 4.73 ...........................

Consider a portion of monthly return data on 20-year Treasury Bonds from 2006-2010.

Year................ Month................ Return (%)

2006.................... Jan........................ 4.65

2006.................... Feb........................ 4.73

⋮........................... ⋮ ..............................⋮

2010.................... Dec ........................4.16

a. Plot the above series and discuss its seasonal variations.

b. Construct the seasonal indices for the data.

c. Estimate a linear trend model to the seasonally adjusted series.

d. Use the trend and seasonal estimates to make forecasts for the first three months of 2011.

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a The monthly return on bonds mostly shows a jagged downward trend with the lowest at 318 in December 2008 peak of the financial crisis in the US b Ca... View full answer

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