Which of the following addresses the duty of prudence?

Prepare for the Canon Financial Institute CFIRS Exam with flashcards and multiple choice questions. Each question comes with hints and explanations for better understanding. Get ready to excel in your exam!

The duty of prudence, which requires fiduciaries to act with care, skill, prudence, and diligence when making investment decisions, is fundamentally addressed by several key concepts and legal frameworks.

The Prudent Person Rule is a historical guideline that obligates fiduciaries to make investment decisions as a prudent person would, with a focus on assessing risk and return. It emphasizes the need to carefully evaluate investment choices with regard to the interests of the beneficiaries.

The Prudent Investor Act is a specific piece of legislation that modernizes the standards of investment conduct for trustees. It requires that investments be evaluated based on the total portfolio approach, considering not just individual investments but how they work together in the context of the overall investment strategy.

The Prudent Investor Rule is an extension of the above principles, emphasizing the requirement for fiduciaries to invest with care and to consider factors such as diversifying investments to minimize risk.

By recognizing all these elements collectively, the answer acknowledges that each of these frameworks contributes to the overarching principle of prudence in fiduciary duty. Thus, it is accurate that all the mentioned options address the duty of prudence in a significant way.

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