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.

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1970 1990 Year Dependent variable s: Rate 44 total cases of which 13 are missing R squa red 17.2% R squared (adjusted)# 14.4% s 3.164 with 31-2 29 degrees of freedom rable Coefficient SE(Coeff) t-ratio P-value 1.755 Intercept 12.8110 7.30 <0.0001 Lag3 0.451563 0.138 2.4 0.0203 16 12 E 8 10 20 30 40 Weeks