How to Calculate Standard Normal Distribution
The NORM.S.DIST Function is categorized under Statistical functions. It will calculate the Standard Normal Distribution function for a given value. The NORM.S.DIST function can be used to determine the probability that a random variable that is standard normally distributed would be less than 0.5.
In financial analysis, NORM.S.DIST helps calculate the probability of getting less than or equal to a specific value in a standard normal distribution. For example, it can be used for changes in the price indices, and stock prices are assumed to be normally distributed.
The NORM.S.DIST function uses the following arguments:
- Z (required argument) – It the value for which we want the distribution.
- Cumulative (required argument) It is the logical argument that denotes the type of distribution to be returned.
If “cumulative” = True (normal cumulative distribution function), the area under the curve to the left of “x” is returned. That is, it would use the cumulative distribution function.
If “cumulative” = False (normal density function), the height of the curve at “x” is returned. That is, it would use the probability density function. So, the mean = 0 and the standard deviation = 1.
How to use the NORM.S.DIST Function in Excel?
To understand the uses of the NORM.S.DIST function, let us consider an example of standard normal distribution:
Suppose we are given z = 1.333.
The formula used here for the cumulative distribution function is:
We get the result below:
The formula used for calculating the probability distribution function is:
We get the result below:
Few notes about the NORM.S.DIST Function
- The NORM.DIST() function refers to any normal distribution, whereas the NORMSDIST() compatibility function and the NORM.S.DIST() consistency function refers specifically to the unit normal distribution.
- #VALUE! error – Occurs when any of the given argument is non-numeric or is a non-logical value.
- S.DIST is a special case of NORM.DIST. If we let the mean equal 0 and the standard deviation equal 1, the calculations for NORM.DIST match those of NORM.S.DIST.
- Th NORM.S.DIST function was introduced in MS Excel 2010 as a replacement for the NORMSDIST function.
Thanks for reading CFI’s guide to important Excel functions! By taking the time to learn and master these functions, you’ll significantly speed up your financial analysis. To learn more, check out these additional resources: