What Excel formula generates a value for a normal random variable?

• A. RAND()
• B. NORM.DIST(RAND(), mean, sd, TRUE)
• C. NORM.S.INV(0.5)
• D. NORM.INV(RAND(), mean, standard deviation)

Answer: (D)

Generating a value for a normal random variable comes from the idea of inverse transform sampling: take a uniform random probability and map it through the inverse CDF of the normal distribution. In Excel, the normal distribution’s inverse CDF is NORM.INV(p, mean, sd). By feeding a uniform random number from RAND() as p, you obtain a random sample from N(mean, sd^2). This approach directly produces values that follow the desired normal distribution.

Using RAND() alone gives a uniform value, not a normal one. Applying NORM.DIST to a random input returns a probability (the CDF value), not a random draw from the distribution. Taking NORM.S.INV(0.5) yields a fixed value (0), not a random sample. So the combination of NORM.INV with RAND() is the correct way to generate a normal random variable with the specified mean and standard deviation.