What is the purpose of the PMT function in Excel?

The PMT function in Excel is specifically designed to calculate the periodic payment amount for a loan based on constant payments and a constant interest rate. This function is invaluable for users who are looking to determine how much they need to pay each period to fully repay a loan over its duration.

The PMT function takes into account the loan amount, the interest rate, and the total number of payments to derive the payment amount. This allows users to budget accordingly and understand their financial obligations when taking out loans or mortgages. It effectively answers the question of how much will be paid on a regular basis, making it a key tool for those managing loans.

In contrast, the other options do not accurately represent what the PMT function does. While calculating loan interest may be related to loans, it is not the function's purpose. Similarly, estimating the future value of investments pertains to different financial calculations, and determining the principal of a loan focuses on the initial amount borrowed rather than the payments over time. Therefore, the option regarding finding periodic payments is the most accurate reflection of the PMT function's capabilities.