Chapter 3

Question 1

Per the Prudent Investor Act, what must the trustee consider when evaluating the trust portfolio as a whole, and as part of an overall investment strategy?

Answer 1

They must consider the purposes, terms, and distribution requirements of the trust.

Question 2

Per the Prudent Investor Act, what considerations must the trustee make when investing and managing trust assets?

Answer 2

1) General economic conditions.
2) Inflation or deflation.
3) Tax consequences.
4) Expected total return.
5) other resources of the beneficiaries.
6) needs for liquidity, income, and preservations of capital.
7) an asset’s special value, if any, with regard to the beneficiaries.

Question 3

What is one way a trustee can achieve diversification?

Answer 3

Investing in mutual funds.

Question 4

What is purpose of the Prudent Investor Act?

Answer 4

To protect investors and their interests when involved in a trust or fiduciary relationship.

Question 5

According to the Uniform Prudent Investor Act, how should a trustee’s investment and management decisions should be evaluated?

Answer 5

Both as part of the trustee’s overall investment strategy, and as part of the entire portfolio.