Question 1 Geoff and Linda live in Glasgow. Both are teachers, with Geoff in full time and Linda in part-time paid employment. When they bought a flat together in June 2018 the i mortgage broker talked them through repayment and interest-only mortgages. They decided to use their savings as a deposit and chose a repayment mortgage, which by June 2020 was standing at 100,000. The market value of their flat had increased by 10% over this time period on the original purchasing price of 110,000. Together, in June 2020 the couple earn a net monthly income of 4000 and their expenditure has averaged 4200 a month over the last two years. In June 2020 their car loan is down from 4,000 to 2,500, their current account balance has dropped to zero and they have an overdraft on their current account of 1500. Meanwhile their savings account holds just 300. They also owe 3000 on a credit card. The rest of their balance sheet has not changed since June 2018. They are reviewing their finances as they are considering improving their home by installing a new kitchen. Table 1 shows their balance sheet and financial ratios in June 2018 Table 1 Geoff and Linda's household balance sheet - June 2018 June 2018 Assets 113,120 Liquid assets 3,120 Cash 120 Table 1 Geoff and Linda's household balance sheet - June 2018 June 2018 Assets 113,120 Liquid assets 3,120 Cash 120 Current account 2,000 Instant access savings account(s) 1,000 Other liquid assets 0 Other assets 110,000 Home 110,000 Liabilities 110,000 Short-term liabilities 1,000 Overdraft 0 Credit card 1,000 Other short-term liabilities 0 Other liabilities 109,000 Personal loans 4,000 Mortgage 105,000 Ratios Ratios Net worth / wealth 3,120 Current asset ratio 3.12 Leverage ratio 97.24 1.1 Using the information provided in Table 1, complete the couple's balance sheet for June 2020. (4 marks) 1.2 Explain the factors Linda and Geoff might have considered in choosing a repayment mortgage over an interest-only mortgage in 2018. (3 marks) 1.3 Using the financial ratios and other relevant information, compare the couple's financial situation in June 2018 and June 2020, and explain whether you lean towards their home improvement idea. (4 marks) 1.4 Briefly explain two other possible actions they could take to improve their financial situation. (4 marks) (Total marks available for Question 1: 15 marks) Question 1 Geoff and Linda live in Glasgow. Both are teachers, with Geoff in full time and Linda in part-time paid employment. When they bought a flat together in June 2018 the i mortgage broker talked them through repayment and interest-only mortgages. They decided to use their savings as a deposit and chose a repayment mortgage, which by June 2020 was standing at 100,000. The market value of their flat had increased by 10% over this time period on the original purchasing price of 110,000. Together, in June 2020 the couple earn a net monthly income of 4000 and their expenditure has averaged 4200 a month over the last two years. In June 2020 their car loan is down from 4,000 to 2,500, their current account balance has dropped to zero and they have an overdraft on their current account of 1500. Meanwhile their savings account holds just 300. They also owe 3000 on a credit card. The rest of their balance sheet has not changed since June 2018. They are reviewing their finances as they are considering improving their home by installing a new kitchen. Table 1 shows their balance sheet and financial ratios in June 2018 Table 1 Geoff and Linda's household balance sheet - June 2018 June 2018 Assets 113,120 Liquid assets 3,120 Cash 120 Table 1 Geoff and Linda's household balance sheet - June 2018 June 2018 Assets 113,120 Liquid assets 3,120 Cash 120 Current account 2,000 Instant access savings account(s) 1,000 Other liquid assets 0 Other assets 110,000 Home 110,000 Liabilities 110,000 Short-term liabilities 1,000 Overdraft 0 Credit card 1,000 Other short-term liabilities 0 Other liabilities 109,000 Personal loans 4,000 Mortgage 105,000 Ratios Ratios Net worth / wealth 3,120 Current asset ratio 3.12 Leverage ratio 97.24 1.1 Using the information provided in Table 1, complete the couple's balance sheet for June 2020. (4 marks) 1.2 Explain the factors Linda and Geoff might have considered in choosing a repayment mortgage over an interest-only mortgage in 2018. (3 marks) 1.3 Using the financial ratios and other relevant information, compare the couple's financial situation in June 2018 and June 2020, and explain whether you lean towards their home improvement idea. (4 marks) 1.4 Briefly explain two other possible actions they could take to improve their financial situation. (4 marks) (Total marks available for Question 1: 15 marks)