Graham gets 10 units of utility from consuming an apple today, but needs 3 apples
tomorrow to achieve the same level of utility. Graham's discount factor is only $\frac{1}{3}$ if he is riskneutral.

Question

Quizplus · Accepted Answer

Graham's discount factor is only $\frac{1}{3}$, which means that he values future utility at only one-third of the value of present utility. This implies that he is risk-neutral, as he is indifferent between receiving 10 units of utility today or 3 units of utility tomorrow.

Graham Gets 10 Units of Utility from Consuming an Apple 13\frac{1}{3}31​

Graham Gets 10 Units of Utility from Consuming an Apple $\frac{1}{3}$