Question 1 Sandra lives in a one-bedroom flat in Glasgow. She works as a full-time call centre operator, taking 999 call

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Question 1
Sandra lives in a one-bedroom flat in Glasgow. She works as afull-time call centre operator, taking 999 calls. When she boughtthe flat in February 2020, the mortgage broker talked her throughrepayment and interest-only mortgages. She decided to use hersavings as a deposit and chose a repayment mortgage which, byFebruary 2022, had an outstanding balance of £125,000. The originalpurchase price in 2020 was £159,000 and the market value of herflat has increased by 3% over this time period.
In February 2022, Sandra earns a net monthly income of £1,610and her expenditure has averaged £1,630 a month over the last twoyears. In February 2022, a loan to conduct an initial refurbishment(an updated heating system) is down from £3,000 to £1,000, but hercurrent account balance has dropped to zero. She has no cash andshe has an overdraft on her current account of £1,500. Meanwhile,her savings account holds just £120 and she also owes £2,500 on acredit card.
She is reviewing her finances as she would like to buy asecond-hand car.
Table 1 shows her balance sheet and financial ratios in February2020.
Table 1 Sandra’s household balance sheet – February2020
February 2020 (£)
Assets (Total)
161,250
Liquid assets
2,250
Cash
250
Current account
1,500
Instant access savings account(s)
500
Other liquid assets
0
Other assets
159,000
Home
159,000
Liabilities (Total)
137,500
Short-term liabilities
1,500
Overdraft
0
Credit card
1,500
Other short-term liabilities
0
Other liabilities
136,000
Personal loans
3,000
Mortgage
133,000
Ratios
Net worth / wealth
23,750
Current asset ratio
1.5
Leverage ratio
85.27
1.1 Using the information provided above,complete Sandra’s balance sheet for February2022. (4 marks)
1.2 Explain the factors Sandra might haveconsidered in choosing a repayment mortgage over an interest-onlymortgage in 2020. (3 marks)
1.3 Using the financial ratios and otherrelevant information, compare Sandra’s financial situation inFebruary 2020 and February2022. (4 marks)
1.4 Briefly explain two other possible actionsSandra could take to improve her financialsituation. (4 marks)