What function is used to calculate the payment amount for a loan in the given example?

The PMT function is specifically designed to calculate the payment amounts for loans or annuities based on constant payments and a constant interest rate. It takes into account the total number of payment periods, the interest rate per period, and the present value (principal) of the loan, returning the regular payment amount that needs to be made to repay the loan over the specified periods.

In scenarios involving mortgages, car loans, or any type of installment payment, PMT provides an essential calculation that helps individuals budget their finances. Each payment calculated with the PMT function includes both principal and interest, highlighting the utility of this function in financial modeling and analysis.

In contrast, other options serve different purposes. The SUM function simply adds numbers together and does not calculate payments. The IPMT function focuses solely on calculating the interest portion of a specific payment, while NPER is used to determine the number of periods for an investment or loan. Thus, selecting the PMT function is the appropriate choice for calculating payment amounts directly related to loans.