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Define three methods than could be utilized to exercise quality control and describe the advantages and disadvantages of all.
Methods comprise:
• Self-checking: Rapid, cheap and gives confidence people to take responsibility for their own work. Though, people frequently have trouble while spotting their own mistakes.
• Peer review: Relatively cheap and provides a ‘second pair of eyes’. Though people may be reluctant to criticise their colleagues or more eager to do same and the ‘peer’ are very similar to the author of the product to provide in fact objective view.
• Team leader or management review: Gives a coaching opportunity and permits the work to be examined by a different and possibly wider perspective. The manager may not be technically qualified to perform the review and extreme use of the ‘red pen’ can de-motivate staff; also the manager may grow to be a bottleneck in production.
• Walkthrough: Very methodical, as this involves a number of people examining the product by different perspectives. Nonetheless, this method is labour-intensive and thus expensive and committee reviews can be complicated to schedule where people have busy diaries.
• Fagan inspection: Mostly structured version of the walkthrough. Enormously thorough but also extremely costly and probably best used for very significant or critical deliverables.
• External review: Gives a very objective review but external reviewers may not be familiar adequate with the exact project and raise irrelevant comments.
Question: (a) Assume that a market is in equilibrium and all investors agree that the return on any diversified portfolio P is equal to R P = a p + b p 1 F 1 + bp 2 F 2
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