C4. Juan is involved in a court case, which is expected to be finalised in the next 6 months. If he loses the case, he will have to buy 52,000 shares in PKZ Ltd. If he wins the case he will not have to buy the shares. The current PKZ share price is $39.00 per share and the current price of a 6-month call option, with an exercise price of $40, is $4.25. Juan fears the PKZ share price may increase dramatically in the next 6 months. He is willing to bear the risk of the price increasing to $40, but no more than that. Why is a forward contract to buy PKZ shares not an appropriate instrument to hedge Juan's risk? o How can Juan hedge this risk? What outcomes may occur if Juan loses the case? e What outcomes may occur if Juan wins the case