The following data shows the average interest rate (%) for a 30-year fixed-rate mortgage over a ten-year period (FreddieMac website). 

a. Construct a time series plot. Do you think a linear trend or a quadratic trend will provide a better fit for this time series? Why? 

b. Develop the linear trend equation for this time series. Using this linear trend equation, forecast the average interest rate for period 11. 

c. Develop the quadratic trend equation for this time series. Using this quadratic trend equation, forecast the average interest rate for period 11. 

d. Compare your answers to parts (b) and (c). Which model would you recommend? Why?

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Period Interest Rate (%) 1 6.41 2 6.34 3 6.03 4 5.04 5 4.69 6 4.45 7 3.66 8 3.98 9 4.17 10 3.85