Using the "RAND()" function

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The "RAND()" function is the most essential building block of Monte Carlo models in Excel.  The function is Excel's native random number generator.  The function returns an evenly distributed random real number greater than or equal to 0 and less than 1.  A new random real number is returned every time the worksheet is calculated.

A useful variation of the RAND() function is the function RANDBETWEEN(), which returns a random integer number between the numbers you specify. A new random integer number is returned every time the worksheet is calculated.  If this function returns the #NAME? error, you may need to install and load the Analysis ToolPak add-in.  For more information on how to do this, see www.AnalysisToolPak.com.

To use the RAND() function, simply enter "=RAND()" in the spreadsheet cell.  Each time the spreadsheet is updated or recalculated a new random number will be generated.

A random number is the the core of each variable in your Monte Carlo model.  The random numbers must be manipulated to yield output consistent with the actual problem being modeled.  This is addressed in the topic "Learning to model the problem".

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