# 🎯 Bonus Assignment — Portfolio Design Exercise

You have just learned the three key ingredients for **portfolio construction**:

1. **Expected Return**
2. **Standard Deviation (Risk)**
3. **Correlation** between assets

Now, you will use this information to design a simple **three-asset portfolio**.

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## 📊 Available Assets

| Asset | Expected Return (Yearly) | Std. Deviation | Correlation with US Equity | Correlation with US Bond | Correlation with Global Equity |
|:------|:-------------------------:|:---------------:|:---------------------------:|:-------------------------:|:-------------------------------:|
| **US Equity Index** | 8% | 20% | — | -0.4 | 0.7 |
| **US Bond Index** | 4% | 10% | -0.4 | — | -0.6 |
| **Global Equity Index** | 10% | 30% | 0.7 | -0.6 | — |

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## 🧮 Instructions

Please follow the three steps below to design your portfolio.
(You may answer **in English or Chinese**.)

### Step 1. Choose your target expected return
Decide on a yearly expected return goal for your portfolio.
For example:
> I aim for an expected return of **6.5%**.

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### Step 2. Choose your allocation
Decide your percentage weights among the three assets (the weights must sum to 100%).
Example:

| Asset | Weight |
|:------|:------:|
| US Equity Index | 25% |
| US Bond Index | 50% |
| Global Equity Index | 25% |

Expected portfolio return =
$$ 0.25 \times 8\% + 0.50 \times 4\% + 0.25 \times 10\% = 6.5\% $$

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### Step 3. Explain your reasoning (3–5 sentences)
Briefly describe **why** you chose this allocation.

You may discuss:
- Risk–return tradeoff
- Diversification
- Correlation between assets
- Your tolerance for volatility

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## 📝 Submission

- Please prepare a **short written answer (half to one page)**.
- Export your answer as a **PDF file**.
- **Upload your PDF to TronClass** under this assignment.

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## ✅ Your PDF should include

1. Your **target expected return**
2. Your **chosen weights** (sum to 100%)
3. Your **short explanation**

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✨ *This exercise helps you think about how to balance return, risk, and diversification — the foundation of modern portfolio theory.*