The `LOGNORM.DIST` function in Excel is used to calculate the log-normal distribution of a dataset. This function can be particularly useful when you’re modeling data that is positively skewed, such as financial returns or an asset’s price.
Here’s how you can use the `LOGNORM.DIST` function:
Syntax
LOGNORM.DIST(x, mean, standard_dev, cumulative)
Arguments
- x: This is the value at which you want to evaluate the function.
- mean: This is the mean of the natural logarithm of the distribution.
- standard_dev: This is the standard deviation of the natural logarithm of the distribution.
- cumulative: A logical value that determines the form of the function. If `TRUE`, `LOGNORM.DIST` returns the cumulative distribution function; if `FALSE`, it returns the probability density function.
Usage
=LOGNORM.DIST(x, mean, standard_dev, TRUE)
=LOGNORM.DIST(x, mean, standard_dev, FALSE)
=LOGNORM.DIST(10, 2, 0.5, TRUE)
- Open Excel and navigate to the cell where you want to calculate the log-normal distribution.
- Enter the formula, using the correct syntax:
- For the cumulative distribution function:
- For the probability density function:
- Replace the placeholders with your actual data values. For example, if you want to calculate the cumulative log-normal distribution at a value of 10, with a mean of 2 and a standard deviation of 0.5, you would write:
Example
Imagine you have a dataset with measurements that follow a log-normal distribution. To find the probability that a random variable is less than or equal to 10, with a mean of logarithms of 2 and a standard deviation of logarithms of 0.3, you would use:
=LOGNORM.DIST(10, 2, 0.3, TRUE)
This will give you the cumulative probability up to the value of 10.
Note
- It’s important to remember that the mean and standard deviation provided to `LOGNORM.DIST` need to be for the natural logarithms of your dataset.
- The function provides meaningful results only when `x > 0`, `standard_dev > 0`, and the logical values of `cumulative` is either `TRUE` or `FALSE`.
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