- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 10. The Lognormal Distribution

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**CFA Practice Question**

Which of the following statements is (are) incorrect?

II. If the logarithm of base ten of a random variable follows a normal distribution, then that random variable follows a lognormal distribution.

III. The lognormal distribution has a long right tail.

IV. The lognormal distribution is always bounded below by zero.

I. The lognormal distribution is always related to the normal distribution.

II. If the logarithm of base ten of a random variable follows a normal distribution, then that random variable follows a lognormal distribution.

III. The lognormal distribution has a long right tail.

IV. The lognormal distribution is always bounded below by zero.

Correct Answer: II only

If the logarithm of base ten of a random variable follows a normal distribution, then that random variable follows a lognormal distribution. The affirmation is incorrect. If the natural log of a random variable follows a normal distribution, then that random variable follows a lognormal distribution.

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**User Contributed Comments**
4

User |
Comment |
---|---|

danlan |
The base should be e and not 10. |

dcfa |
@danlan, I am not sure - I think the point is that the base is not important. |

cleopatraliao |
the base is important--natural logarithm is e base:) |

ashish100 |
damn i need to go hard at the gym after June 3rd. |