Given that the annual interest rate on U.S. government bonds is 8% with an inflation rate of 4%, and Switzerland's government bonds offer a 10% interest rate with a 7% inflation rate, in which direction will investment capital most likely move?

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From the U.S. to Switzerland, leading to a depreciation of the dollarFrom the U.S. to Switzerland, resulting in the dollar appreciatingFrom Switzerland to the U.S., causing the Swiss franc to lose valueFrom Switzerland to the U.S., making the Swiss franc strengthenNo significant capital movement between the two countries

Explanation

Because the real interest rate (nominal interest minus inflation) is higher in the U.S. (4%) compared to Switzerland (3%), investors are inclined to transfer funds from Switzerland to the U.S. This capital flow causes the Swiss franc to depreciate relative to the dollar.