Final answer:
In the compound interest formula, 'c' represents the initial investment amount. It is a key part of determining the future value of an investment when compounded interest is applied over multiple periods.
Step-by-step explanation:
In the expression c (1+ r/n) used to calculate the future value of an investment where the interest is compounded, the variable c represents the Initial investment amount. This expression is part of a larger compound interest formula, which takes into account not only the initial investment but also the annual interest rate (r), the number of times the interest is compounded per year (n), to find the amount available at the end of the period. Compound interest adds the interest to the principal so that in the next period, the interest is then earned on the new principal, which is a sum of the previous principal and the interest added to it.
To find the compound interest specifically, you subtract the initial principal from the future value calculated with the formula. If the future value is higher than the initial investment, it indicates that the investment has earned interest over time. Applying this formula to a multi-year scenario can illustrate the growth of the investment due to compounding effects.