0. Is the MdP important for the development of the Portuguese economy? The Well-being of its citizens? Ideally, how should we run such a business? Take risks? Downsize or scale up quickly?

1. Why does MdP need to reduce its interest payments? Is it in financial distress BEFORE signing any swap agreements? What are the possible ways to resolve the crisis without using derivatives? [a] Discuss the leverage and profitability of MdP (support your claims with financial ratios and numbers!). [b] What does the account "Grants and subsidies" mean? Is it important? [c] Look at the cashflow statement. Are the cashflows positive or negative?

2. VERY carefully analyze the payoffs, potential profits and losses, benefits and risks of the fixed-to-floating (vanilla) swap implemented with BCP. Show least 3 scenarios for the path the variable interest rate and analyze the potential payments. For example, interest rates remain relatively stable; there is an increase in interest rates to 7%; there is a drop of interest rates to 1%. For each scenario, compute the first 10 years worth of payments (NB payments are quarterly). Does the BCP swap provide protection against interest rate risk (hedging)? Don't worry about pricing the swap.

3. VERY carefully analyze the payoffs, potential profits and losses, benefits and risks of the "snowball" swap implemented with Santander. Show at least 3 scenarios for the path the variable interest rate and analyze the potential payments. For example, interest rates remain relatively stable; there is an increase in interest rates to 7%; there is a drop of interest rates to 1%. For each scenario, compute the first 10 years worth of payments (NB payments are quarterly). Does the "snowball" swap provide protection against interest rate risk (hedging)?

4. How does the upside for MdP compare with the downside? What is the nature of the risk that MdP is taking on? What is the size of the risk?

5. Is this swap excessively complex?

6. Is the swap hedging or speculation?