Step 1: Understanding the \texttt{break} statement.
In Python, the \texttt{break} statement is used to exit the loop entirely. When the \texttt{break} statement is encountered, it terminates the loop, and the program continues to execute the code following the loop.
Step 2: Evaluating the options.
- (1) Skips the current iteration: Incorrect. The \texttt{continue} statement is used to skip the current iteration in a loop, not \texttt{break}.
- (2) Exits the loop: Correct. The \texttt{break} statement exits the loop completely when encountered.
- (3) Continues to the next iteration: Incorrect. The \texttt{continue} statement is used for moving to the next iteration, not \texttt{break}.
- (4) Stops the function: Incorrect. The \texttt{break} statement does not stop a function; it only exits a loop.
Step 3: Conclusion.
The correct answer is (2) Exits the loop, as that is the behavior of the \texttt{break} statement.
Final Answer:} Exits the loop.