F IL E Consider a portion of monthly return data on 20-year Treasury Bonds from 2006–2010. The full data set can be found on the text website, labeled Treasury Bonds.

Year Month Return (%)

2006 Jan 4.65 2006 Feb 4.73

⋮ ⋮ ⋮

2010 Dec 4.16 SOURCE: Federal Reserve Bank o f Dallas.

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.