I am now confused so please figure this questions out for me. Please follow the instruction and explain it clearly for me. Thanks.

he real interest rate is currently 2%, and is expected to remain at that level for the next two years. In contrast, the inflation premium is expected to decrease from an annual rate of 7% during the next year, to an annual rate of 3% during the second year A. What is the EXACT (3 decimal places) annual interest rate on a two-year loan? B. Assume that a fixed interest rate loan is issued at the rate you calculated in Part A. If the annual inflation rate turns out to be 7% over the entire two- year period (briefly explain each answer): is purchasing power transferred from the borrower to the lender, or from the lender to the borrower? * is the realized real interest rate on this loan higher or lower than the expected real rate