For whomever reads this that is as innumerate as I am and is confused about the example simulation with the excel formula “=norminv(rand(), 15, (20–10)/3.29)”, I hope my explanation below helps (and is correct!).
The standard error/deviation* of 3.29 is such because that’s the correct value for the confidence interval of 90%. That number is determined by the confidence interval used. It is not the standard deviation of $10-$20. Don’t ask me why, I don’t know, yet.
Additionally, you can’t just paste that formula into excel. Remove the range (20-10) and keep the standard error.
At least that’s the best understanding I have of it thus far. I could be wrong!
*Standard deviation is for entire populations and standard error is for samples of populations.
For whomever reads this that is as innumerate as I am and is confused about the example simulation with the excel formula “=norminv(rand(), 15, (20–10)/3.29)”, I hope my explanation below helps (and is correct!).
The standard error/deviation* of 3.29 is such because that’s the correct value for the confidence interval of 90%. That number is determined by the confidence interval used. It is not the standard deviation of $10-$20. Don’t ask me why, I don’t know, yet.
Additionally, you can’t just paste that formula into excel. Remove the range (20-10) and keep the standard error.
At least that’s the best understanding I have of it thus far. I could be wrong!
*Standard deviation is for entire populations and standard error is for samples of populations.
Edit: fixed link to Monte Carlo spreadsheet & all the other downloads for the book