Uzima Company, whose home currency is the Kenya shillings, took a fixed interest Uganda shilling bank loan a few years ago when the interest rates were fairly cheaper compared to Kenyas interest rates.Economic challenges have now increased Uganda's interest rates while Kenya interest rates have remained relatively stable. Uzima Company must pay interest of USHS100,000 in six months time.

The following information is available. Spot rate Six month forward Kes 1 /Ushs 29.0687 -29.2685 .

Six month foward Kes 1/Ushs 30.4638 - 30.6732 rate. Prevailing interest rates are tabulated as:

Country Borrow Deposit

Uganda 22.5% p.a. 11%p.a

Kenya 16.89%/ p.a. 66%p.a

Required: Calculate whether a forward market hedge should be used to hedge the interest payment of Ushs. 100 million in six month's time. Assume that Uzima Company would need to borrow cash in hedging exchange rate risk.