LOGNORM.INV

In this comprehensive guide, we will explore the LOGNORM.INV function in Excel, which is used to calculate the inverse of the lognormal cumulative distribution function for a given probability and specified mean and standard deviation. This function is particularly useful in finance, engineering, and other fields where lognormal distributions are commonly encountered. We will cover the syntax, examples, tips and tricks, common mistakes, troubleshooting, and related formulae for the LOGNORM.INV function.

LOGNORM.INV Syntax

The syntax for the LOGNORM.INV function in Excel is as follows:

=LOGNORM.INV(probability, mean, standard_dev)

Where:

• probability (required) – This is the probability associated with the lognormal distribution, and it must be a value between 0 and 1, exclusive.
• mean (required) – This is the mean of the natural logarithm of the distribution.
• standard_dev (required) – This is the standard deviation of the natural logarithm of the distribution. It must be a positive value.

LOGNORM.INV Examples

Let’s look at some examples of how to use the LOGNORM.INV function in Excel.

Example 1: Basic LOGNORM.INV Function

Suppose we have a lognormal distribution with a mean of 3 and a standard deviation of 0.5. We want to find the value corresponding to a probability of 0.75. We can use the LOGNORM.INV function as follows:

=LOGNORM.INV(0.75, 3, 0.5)

This formula will return the value 23.104, which is the inverse of the lognormal cumulative distribution function for the given probability, mean, and standard deviation.

Example 2: LOGNORM.INV Function with Cell References

Instead of using hardcoded values, we can also use cell references in the LOGNORM.INV function. Let’s say we have the following data in our worksheet:

A1: Probability: 0.85

A2: Mean: 2.5

A3: Standard Deviation: 0.3

We can use the LOGNORM.INV function with cell references as follows:

=LOGNORM.INV(A1, A2, A3)

This formula will return the value 13.463, which is the inverse of the lognormal cumulative distribution function for the given probability, mean, and standard deviation.

LOGNORM.INV Tips & Tricks

Here are some tips and tricks to help you get the most out of the LOGNORM.INV function in Excel:

1. Remember that the LOGNORM.INV function works with the natural logarithm of the distribution. If you have the mean and standard deviation of the original distribution, you will need to convert them to the natural logarithm scale before using the LOGNORM.INV function.
2. Use the LOGNORM.INV function in conjunction with other statistical functions in Excel, such as LOGNORM.DIST, NORM.INV, and NORM.DIST, to perform more complex analyses of lognormal distributions.
3. When working with financial data, the LOGNORM.INV function can be useful for modeling stock prices, as they often follow a lognormal distribution.

Common Mistakes When Using LOGNORM.INV

Here are some common mistakes to avoid when using the LOGNORM.INV function in Excel:

1. Using a probability value less than 0 or greater than 1. The probability must be between 0 and 1, exclusive.
2. Using a negative or zero value for the standard deviation. The standard deviation must be a positive value.
3. Not converting the mean and standard deviation of the original distribution to the natural logarithm scale before using the LOGNORM.INV function.

Why Isn’t My LOGNORM.INV Working?

If you’re having trouble with the LOGNORM.INV function, consider the following troubleshooting steps:

1. Double-check your input values for probability, mean, and standard deviation. Ensure that they meet the requirements specified in the syntax section.
2. Make sure you’re using the correct cell references if you’re using them in your formula.
3. Check for any errors in your formula, such as incorrect function names or missing parentheses.

LOGNORM.INV: Related Formulae

Here are some related formulae that you might find useful when working with lognormal distributions in Excel:

1. LOGNORM.DIST – This function calculates the lognormal cumulative distribution function for a given value, mean, and standard deviation.
2. NORM.INV – This function calculates the inverse of the normal cumulative distribution function for a given probability, mean, and standard deviation.
3. NORM.DIST – This function calculates the normal cumulative distribution function for a given value, mean, and standard deviation.
4. EXP – This function calculates the exponential value of a given number. It can be useful for converting values between the natural logarithm scale and the original scale.
5. LN – This function calculates the natural logarithm of a given number. It can be useful for converting values between the original scale and the natural logarithm scale.

By understanding the LOGNORM.INV function and its related formulae, you can effectively analyze and work with lognormal distributions in Excel. Remember to follow the tips and tricks, avoid common mistakes, and troubleshoot any issues you may encounter to get the most out of this powerful statistical function.