The 3-month Treasury bill interest rate is watched by investors and economists. Here’s the scatterplot of the 3-month Treasury bill rate since 1934 that we saw in Exercise 43:

Clearly, the relationship is not linear. Can it be made nearly linear with a re-expression? If so, which one would you suggest? If not, why not?

Data From Exercise 43

In Exercise 41, you investigated the federal rate on 3-month Treasury bills between 1950 and 1980. The scatterplot below shows that the trend changed dramatically
after 1980, so we computed a new regression model for the years 1981 to 2015.

Here’s the model for the data from 1981 to 2015 (in years since 1950):

Transcribed Image Text:

Rate (%) 14 12 10 8 6 4 2 0 + ******* + 1940 000 1960 Year 1980 2000 0900