Normal Distribution vs Standard Normal Distribution using excel

CFA Level II
#1

Hello everyone,

I am not sure if I should be starting this thread in level 2 forum or level 1 forum. I’ve chosen it to be on level 2 forum anyway. Probably because I am a level 2 candidate myself. Just done with the exam but still cant keep myself from studying. I’d say I’m suffering from obsessive compulsive behavior.

I am reading this book “STATISTICAL_ANALYSIS_WITH_EXCEL_FOR_DUMMIES” and working to improve my excel capabilities. Anyone who wants to put into practice the concepts they learnt in two level of CFA, should read this book. Its a great book.

Anyway, I am stuck on the topic Normal Distribution (calculated through NORMDIST function) and Standard Normal Distribution (calculated through NORMSDIST function). I am a little confused on the concept behind normal distribution and standard normal distribution. I understand that Standard Normal Distribution is a normal distribution which has its mean = 0 and SD = 1.

Can someone please tell me the similarities and differences between normal distribution and standard normal distribution?. Also any other important concepts of each

#2

Both functions do the same thing. It is the input that varies.

For NORMDIST, you have to supply your “x,” “mu,” and standard deviations separately. Then Excel calculates the standardized values for you automatically using the formula: (x - mu)/std .dev.

For NORM S DIST, you have to supply the standardized value yourself. Meaning, Excel assumes you have utilized the above formula to calculate the z score before calling the function.

Not sure what version of Excel you’re using, but things have improved in 2010/2013. You should be using the functions NORM.DIST and NORM.S.DIST.

As a side note, both functions have this notion of “mass” probability. For financial analysis, we almost always use “cumulative” probability, which is what Excel defaults to using if you don’t specify anything.