My goal is to forecast t-bill/note interest rates to help determine whether it'd be useful to purchase an interest rate swap on a loan (25 year amort. due in 7 years).

I have learned ARIMA models, specifically AR[1] models are useful to forecasting rates.

Please see attached spreadsheet for my work so far.

My questions are:

1. Should I difference the observations from the mean before regression?

2. Once preceding periods stop becoming known (t-1), does the input into the model become the preceding period's forecasted rate?

3. Which of these two models should I select (if either)?

4. In the attached spreadsheet, am I completely doing this wrong?

I did not transform the data, the histogram shows it as fairly normally distributed, but if there is any input on this I'd be really appreciative.

Thank you very much for any help that you can give! I've really been struggling with these concepts.