The T.DIST Function is categorized under Excel Statistical functions. It will calculate the T distribution. The T distribution is a continuous probability distribution that is frequently used in testing hypotheses on small sample data sets. This guide will show you how to use the T Distribution Excel formula and T Value Excel function step by step.
As a financial analyst, T.DIST is used in portfolio risk analysis. It is used to model asset returns to take care of heavy tails. This is so as the T distribution includes fatter tails, which gives higher values of value-at-risk at high confidence levels.
The T.DIST function was introduced in Excel 2010, hence, is not available in earlier versions.
The T.DIST function uses the following arguments:
X (required argument) – This is the numeric value at which we wish to evaluate the T Distribution.
Deg_freedom (required argument) – An integer that indicates the number of degrees of freedom.
Tails (required argument) – This specifies the number of distribution tails that would be returned. If tails =1, T.DIST returns the one-tailed distribution. If tails = 2, T.DIST returns the two-tailed distribution.
How to use the T Distribution Excel function
To understand the uses of the T.DIST function, let us consider a few examples:
Suppose we are given the following data:
If we want to calculate the value of the function at x = -1, it can be done using the formula below:
We get the result below:
The result we get is 82.95%.
If we want to calculate the value of the function at x = 1, it can be done using the formula below:
We get the result below:
The result we get is 23.036%.
Things to remember about the T Value Excel function
#NUM! error – Occurs when:
The given cumulative is TRUE and deg_freedom < 1.
The given cumulative is FALSE and deg_freedom < 0.
VALUE! error – Occurs when the given arguments are non-numeric.
The deg_freedom and tails arguments are truncated to integers.
#DIV/0 error – Occurs when the given cumulative is FALSE and deg_freedom is equal to 0.
Thanks for reading CFI’s guide to the T Distribution Excel function and the T Value Excel function! 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 CFI resources:
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