Final answer:
The Prudent Person Rule and the Prudent Investor Rule both concern the duty of prudential investment strategies, focusing on risk management, diversification, and achieving a reasonable return.
Step-by-step explanation:
The Prudent Person Rule and the Prudent Investor Rule address the duty of prudence. The Prudent Person Rule historically required trustees to invest carefully and conservatively, considering the potential risk versus the likely return, as would a prudent person managing their own affairs. The Prudent Investor Rule, often found in modern statute in the form of the Uniform Prudent Investor Act, updates this concept. It takes into account not only the risk of an individual investment but also the role that investment plays within the context of an overall diversified portfolio.
Both rules emphasize the importance of making decisions that a cautious and sensible investor would make to protect the principal while providing a reasonable return. Professionalism, consideration of risk versus return, diversification, and suitability of investments for the trust's objectives are key tenets of these rules.