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Lecture4-Basic-Probabilities-Excel

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26 views

Lecture4-Basic-Probabilities-Excel

Uploaded by

Ricx Rosco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Why use Excel to calculate probability?

• It takes advantage of built-in macros that the


software provides.

• Makes the calculation quicker.

• Reducing the possibility of a calculation error.


Here are some situations where a business might consider
using a probability table:

• Projecting growth based on data a marketing campaign provided.


• Assessing potential delays to a project due to severe weather
predictions
• Creating a sales projection range to predict the most likely
success levels for a product.
• Performing risk assessment on a project to determine potential
costs of risks the project faces.
• Estimating delivery dates on a project
Important terms when calculating probability in Excel:

Table: Excel requires you to enter the information into a table of at


least two columns and multiple rows of data.

Cell: The boxes in a table that contain your important pieces of data
are called cells.

Limits: Setting boundaries for the range, known as the upper and
lower limits.

Function: PROB function to find probabilities from a table of data


and the SUM function to add a series of numbers.
How to find probabilities quickly using the
PROB function:
1 . Gather the data
The more data points you enter into the probability
table, the more versatile your table becomes, as it
allows you to select more precise ranges for your
probability calculations. By gathering data, you provide
yourself with the information you need to calculate
probabilities later as you are filling in your probability
chart.
2. Label your chart
Labels ensure that anyone who sees the chart can
quickly understand the data

3. Enter the category data


In order for a PROB function to work, all data in the
column you're checking needs to be a numerical value,
as the PROB function can not be used to find probability
ranges based on text.
4. Sort by category
The PROB function requires you to sort the data in the
table from low to high.

5. Calculate and enter your probabilities


Your data set includes probabilities for each label, enter
each probability into the "Probability" column.

=SUM(Range)
Individual cell / SUM
6. Create a calculation table
To create your probability calculator, you need to create
three new cells:

Lower limit:
Upper limit:
Probability:

=PROB( [top category cell] : [bottom category cell], [top


probability cell] : [bottom probability cell], [cell next to
"Lower limit:" label], [cell next to "Upper limit:" cell] )
Probability calculation examples
This example PROB calculation demonstrates how to create a
probability calculation table in Excel. The first image shows
what to enter into each cell to create the table. It also includes
a row and column showing row numbers and column letters
within Excel. The second image shows the probability
calculation table a teacher might use to determine how many
students will score a C or higher on an exam based on prior
students' results:

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