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I've never bought bonds before and I'm looking into US Treasuries. The 3mo treasury below is described as having a ~4.9% yield. How is this number derived?
To me, it looks like if I buy this note with a face value of $100, I have to pay $98.41716667. So, when it matures, I've earned $1.58283333, which is ~1.583%, correct?
The 1.6% is what you get over the course of 3 months. The 4.9% is annualized.
Here are the actual formulas, if you want to replicate the calculations yourself: https://www.treasurydirect.gov/instit/annceresult/press/preanre/2004/ofcalc6decbill.pdf
Please keep in mind that you're looking a T-bills, which are zero-coupon and have their own pricing conventions (ACT/360 instead of ACT/ACT):
The Bank Discount rate is the rate at which a bill is quoted in the secondary market and is based on the par value, amount of the discount and a 360-day year. The Coupon Equivalent, also called the Bond Equivalent, or the Investment Yield, is the bill's yield based on the purchase price, discount, and a 365- or 366-day year. The Coupon Equivalent can be used to compare the yield on a discount bill to the yield on a nominal coupon security that pays semiannual interest with the same maturity date.
