John Smith saw the following advertisement. Could you show him how $88.77 was calculated?
*As of January 31, 200X, and subject to change. Interest on the 9-month CD is credited on the maturity date and is not compounded. For example, a $2,000, 9-month CD on deposit for an interest rate of 6.00% (6.05% APY) will earn $88.77 at maturity. Withdrawals prior to maturity require the consent of the bank and are subject to a substantial penalty. There is $500 minimum deposit for IRA, SEP IRA, and Keogh CDs (except for 9-month CD for which the minimum deposit is $1,000). There is $1,000 minimum deposit for all personal CDs (except for 9-month CD for which the minimum deposit is $2,000). Offer not valid on jumbo CDs.
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