What is the role of inflation in risk-free investments?

Inflation can impact the returns of riskfree investments. If the inflation rate is higher than the rate of return offered by the riskfree investment, then the real return on investment will be negative. This means that even though the investor is receiving a positive return, the purchasing power of their money is decreasing due to inflation. Therefore, it's important to consider the inflation rate when evaluating the potential returns of a riskfree investment.