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The 91 Day T-Bill Rate

The 91 Day T-Bill Rate. Steven Carlson Miguel Delgado Helleseter Darren Egan Christina Louie Cambria Price Pinar Sahin. Outline . Introduction The Data Transforming the Data The Model The Forecast Conclusion. Introduction. Should those with student loans consolidate?

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The 91 Day T-Bill Rate

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  1. The 91 Day T-Bill Rate Steven Carlson Miguel Delgado Helleseter Darren Egan Christina Louie Cambria Price Pinar Sahin

  2. Outline • Introduction • The Data • Transforming the Data • The Model • The Forecast • Conclusion

  3. Introduction • Should those with student loans consolidate? • Consolidation allows the borrower to roll multiple variable interest rate loans into a single fixed loan. • With interest rates at record lows and growing inflation concerns, consolidation can be a vehicle to significantly lower payments.

  4. The Data • The data is collected from the Federal Reserve Economic Data (FRED) for the 91-day T-bill rate for the last auction date in May of each year.

  5. T-Bill Trace

  6. T-Bill Correlogram

  7. T-Bill Histogram

  8. Dickey-Fuller Test

  9. Transforming the Data • Take the First Difference of the series

  10. Histogram of Transformed Data

  11. Dickey-Fuller Test of Transformed Data

  12. Correlogram of First Difference

  13. The Model

  14. Correlogram of the Model

  15. Actual, Fitted, Residual

  16. Histogram of Residuals

  17. Residuals Squared

  18. ARCH/GARCH Model 1

  19. ARCH/GARCH Model 2

  20. Model 2 Actual, Fitted, Residual

  21. Correlogram of Residuals

  22. Squared Residuals

  23. ARCH Lagrange Multiplier

  24. Testing the Forecasting Capability

  25. Using the Model to Forecast

  26. Plot of Entire Series (Including Forecast)

  27. Forecast Recolored

  28. T-bill Forecast

  29. T-bill Forecast

  30. Conclusion • The predicted result is an interest rate of 1.24% for May, 2005. • The forecasted rate is higher than the current rate. If you want to consolidate your loans, do so before the next rate, which the forecast shows to be higher. • While significant uncertainty exists in the model, the 91-day T-bill rate is expected to steadily increase.

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