Which statement about the PMT financial function is true?

Which statement about the PMT financial function is true?

• A. It calculates the loan payment per period and uses syntax =PMT(rate, nper, pv, [fv], [type])
• B. It calculates the future value of an investment with syntax =FV(...)
• C. It returns the number of periods of a loan with syntax =PER(...)
• D. It creates a chart from a data range there is no syntax

Answer: (A)

PMT is used to figure out how much you pay each period on a loan or annuity when payments are fixed and interest is constant. Its syntax is PMT(rate, nper, pv, [fv], [type]). Here, rate is the interest rate per period, nper is the total number of payment periods, pv is the present value (the loan amount you’re borrowing, entered with the usual cash-flow sign conventions), fv is an optional future value you want after the last payment (often 0 for loans), and type is optional to indicate when payments are due (0 end of period, 1 beginning). So PMT returns the payment amount per period. The other statements don’t fit because they describe different aspects: FV calculates the future value of an investment, not the payment amount; NPER returns the number of periods, not the payment; and creating a chart isn’t done with a PMT function, since charts aren’t produced by a formula with syntax. For a quick check, if you borrow money and want to know your monthly payment, you’d use PMT with the appropriate rate per period, number of periods, and loan amount.

PMT is used to figure out how much you pay each period on a loan or annuity when payments are fixed and interest is constant. Its syntax is PMT(rate, nper, pv, [fv], [type]). Here, rate is the interest rate per period, nper is the total number of payment periods, pv is the present value (the loan amount you’re borrowing, entered with the usual cash-flow sign conventions), fv is an optional future value you want after the last payment (often 0 for loans), and type is optional to indicate when payments are due (0 end of period, 1 beginning). So PMT returns the payment amount per period.

The other statements don’t fit because they describe different aspects: FV calculates the future value of an investment, not the payment amount; NPER returns the number of periods, not the payment; and creating a chart isn’t done with a PMT function, since charts aren’t produced by a formula with syntax. For a quick check, if you borrow money and want to know your monthly payment, you’d use PMT with the appropriate rate per period, number of periods, and loan amount.