How to Calculate Probability Using Excel

Probability is the likelihood that an event will occur. It is measured by comparing the desired event vs. the total number of outcomes. Gamblers use probability to determine which numbers to bet, cards to keep and which horses to bet on. The formula to calculate probability can be rather complex. However, Microsoft Excel has a built-in formula to calculate probability.

Instructions

1. 

   Go to Start>Programs>Microsoft Office>Microsoft Excel. If Excel has been used recently, simply go to Start>Microsoft Excel.

2. 

   Create two columns, one entitled "Numeric grades" and the other "Probability of getting each grade."

3. 

   List the grades from 50, 60, 70, 80, 90 and 100 in cells A2 to A7.

4. 

   List the probabilities associated with each grade from cells B2 to B7. List the numbers as follows: 0.05, 0.1, 0.4, 0.3, 0.1 and 0.05.

5. 

   Enter "=Prob(A2:A7,B2:B7,70,100)". This formula for probability isolates the numeric range of numbers (A2:A7), the probability of getting each grade (B2:B7), the lower range for which the probability is needed (70) and the upper range for which the probability is needed (100). In short, the formula answers the question: What are the chances of someone getting a grade between 70 and 100?

6. 

   Click on the "%" icon to convert the answer (0.85) to a percentage. The resulting answer is 85%. There is an 85% chance that the grade will be between 70 and 100.

Tips & Warnings

• The probabilities must total 1.0. Probabilities often occur along a bell curve with the majority of the distribution in the middle and outliers at the extremes.

• Probabilities are likelihoods; they are not cause/effect relationships and they are not a guarantee that a specific event will occur.

Resources

• Microsoft Excel overview
• Microsoft Excel Monte Carlo simulation
• Probability theory