The discount factor computed shows that the value of each payment will be $1546.
<h3>How to calculate the payment?</h3>
The following can be deduced from the information:
Payment due in 5 months = $1684
Payment due in 8 months = $1323
Annual interest = 11.40%
Monthly interest rate = 11.40%/12 = 0.95%
Present value of payment due 5 months ago = $1684 + (1 + 0.95%)⁵ = $1765.52
Present value of payment due 8 months ago = $1226.62
Total present value = $1765.52 + $1226.62 = $2992.14
After rescheduling, the payments will be in 2 months and 5 months.
Discount factor for payment due in 2 months = 0.9813
Discount factor for payment due in 5 months = 0.9538
Combined discount factors= 0.9360
Therefore, the value of each payment will be:
= $2992.14/(1 + 0.9360)
= $1546
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