First thing we need to know, is the number of periods the investment will be compounded. Because it will be compounded monthly for 4 years, we will have 48 periods (nper=48).
Because we will need $40,000 our desired "future value" (FV) for the account will be 40,000.
And finally, we no our interest rate is 9%, or 0.09.
What we do not know, is the amount we must invest every month to reach the 40,000, or the "Payment" (PMT) required.
nper = 48
FV = 40,000
rate = 0.09
PMT = x
The easiest way to do this is going to be in excel, with the CF function.
First we type:
It will then prompt for the following things
We can ignore the pv, because that would be the amount of money we are starting with, which is 0.
After plugging our info in, it should look like:
*note the double comma after 48, indicating that there is no pv, or present value.
This should give us an answer of: -$58.46
This is negative because we made our Future value positive, and we will be depositing the $58.46 into the account monthly, to then be able to take out the $40,000 at the end.