- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 6. Simulation Methods
- Subject 1. Lognormal Distribution and Continuously Compounding
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.
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. |