Which function will return the monthly payments of a loan?
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Pay (Rate, PV, Nper)
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Pmt (Rate, Nper, PV)
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FV (Rate, Nper, Pmt)
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FV (Rate, Nper, PV)
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None of the above.
To solve this question, the user needs to know the financial functions in Excel and their respective parameters. The user must be familiar with the concept of a loan and its components, such as the principal, interest rate, and term.
Option A: The Pay function is not a recognized financial function in Excel. Therefore, option A is incorrect.
Option B: The Pmt function returns the periodic payment required to pay off a loan, given the interest rate, number of payments, and loan amount. This is the correct function to use for calculating the monthly payments of a loan. Therefore, option B is the correct answer.
Option C: The FV function is used to calculate the future value of an investment or loan, given the interest rate, number of payments, and periodic payment amount. Therefore, option C is incorrect.
Option D: The FV function is used to calculate the future value of an investment or loan, given the interest rate, number of payments, and present value. Therefore, option D is incorrect.
Option E: None of the above functions exist in Excel. Therefore, option E is incorrect.
The answer is: B. Pmt (Rate, Nper, PV)
The PMT function (as in Excel/financial calculators), used as Pmt(Rate, Nper, PV), returns the periodic payment required to amortize a loan given a periodic interest Rate, the total number of payment periods (Nper), and the loan's present value (PV). "Pay(...)" isn't a real financial function. FV(Rate, Nper, Pmt) and FV(Rate, Nper, PV) compute Future Value, the opposite calculation (projecting a value forward), not a periodic payment amount. Since the question specifically asks for the function returning monthly payments, PMT is correct.