Final answer:
The statement that increasing the interest rate, while holding all else constant, will result in an increased future value is correct, as investments earn more interest over time. However, the present value of future cash flows will decrease because they are discounted at a higher rate, while the time period remains unchanged.
Step-by-step explanation:
The correct statement concerning the relationship of the interest rate (i) to present value (PV), future value (FV), and number of periods (N) is: a. If you increase the interest rate, all else held constant, the future value will increase.
When the interest rate increases, the future value of an investment will generally increase, assuming all other factors remain constant. This is because the investment will earn more interest over time. However, the present value of future cash flows will decrease, as a higher interest rate means that future cash flows are discounted more heavily, making them worth less in today's terms. The time period (N) does not inherently change with changes in the interest rate; it is predetermined in the context of a bond or fixed-income investment.