Binomial events represent a sequence of identical Bernoulli events. We use the letter “B” to express a Binomial distribution, followed by the number of trials and the probability of success in each one.

Suppose that you bought a single stock of General Motors. Historically, there is a 60% chance that the price of your stock will go up on any given day (that’s when the closing price is higher than the opening price), and a 40% chance it will drop.

With the probability distribution function, we can calculate the likelihood of the stock price increasing 3 times during the 5-work-day week. If we wish to use the probability distribution formula, we need to plug in 3 for “y”, 5 for “n”, and 0.6 for “p”.

Other related topics you might be interested to explore are Normal distribution and Uniform distribution.

This is an open-access Excel template in XLSX format that will be useful to anyone who wants to work as a Statistician, Business Intelligence Analyst, Data Scientist, Portfolio Manager, or Risk Manager.

You can now download the Excel template for free.

Binomial distribution is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.