According to the Prudent Investor Rule, the trustee must:

According to the Prudent Investor Rule, the trustee must:

– adhere to loyalty, impartiality and ________

– maintain overall portfolio risk at a reasonable level

– provide for reasonable diversification of trust investments

– act with prudence in deciding whether and how to delegate authority to experts and in selecting and supervising agents

– be cost conscious when investing
A . commitment
B . none of these answers
C . prudence
D . diversification
E . supervisors

View Answer

Answer: C

Explanation:

Modern Portfolio Theory dictates that trustees consider a portfolio in its entirety and not just on an investment- by- investment basis.

As a fiduciary, therefore, the trustee must:

– adhere to fundamental fiduciary duties of loyalty, impartiality and prudence.

– maintain overall portfolio risk at a reasonable level

– the trade- off between risk and return is the fiduciary’s central concern.

– provide for reasonable diversification of trust investments.

– act with prudence in deciding whether and how to delegate authority to experts and in selecting and supervising agents.

– be cost conscious when investing.