Kirsten lives in a one-bedroom flat in Dumfries. She works as a full-time nurse. When she bought the flat in February 2021, the mortgage broker talked her through repayment and interest-only mortgages. She decided to use her savings as a deposit and chose a repayment mortgage which, by February 2023, had an outstanding balance of 135,000. The original purchase price in 2021 was 175,000 and the market value of her flat has increased by 2% over this time period. In February 2023, Kirsten earns a net monthly income of 1,796 and her expenditure has averaged 1,800 a month over the last two years. In February 2023, a loan to put in a new kitchen when she moved into her flat is down from 3,000 to 1,500, but her current account balance has dropped to zero. She has no cash and she has an overdraft on her current account of 1,000. Meanwhile, her savings account holds just 150 and she also owes 2,000 on a credit card. She is reviewing her finances as she would like to buy a new central heating system. Table 1 shows her balance sheet and financial ratios in February 2021. Table 1 Kirstens household balance sheet February 2021 February 2021

() Assets (Total) 177,650 Liquid assets 2,650 Cash 350 Current account 1,800 Instant access savings account(s) 500 Other liquid assets 0 Other assets 175,000 Home 175,000 Liabilities (Total) 169,000 Short-term liabilities 1,000 Overdraft 0 Credit card 1,000 Other short-term liabilities 0 Other liabilities 168,000 Personal loans 3,000 Mortgage 165,000 Ratios Net worth / wealth 8,650 Current asset ratio 2.65 Leverage ratio 95.13 1.1

Using the information provided above, complete Kirstens balance sheet for February 2023. (4 marks) 1.2Explain the factors Kirsten might have considered in choosing a repayment mortgage over an interest-only mortgage in 2020. (3 marks) 1.3Using the financial ratios and other relevant information, compare Kirstens financial situation in February 2021 and February 2023. (4 marks) 1.4Briefly explain two other possible actions Kirsten could take to improve her financial situation. (4 marks)