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Imagine that your friend lends you $100 and that the loan is repayable in one year. a. If you are to pay her $108 in one year's time, determine the principal, interest payment, and the nominal interest rate. b. If you are to pay 10% nominal interest on this loan, how much do you have to pay her at maturity? C. In the case of part (b), if the inflation rate is 6% per year, how much is the real interest rate? d. If the inflation rate is higher than that of in part (c), who is benefiting and who is losing in terms of purchasing power?Exercise 3.6 (A ThreePeriod Open Economy) Consider athreeperiod small open endowment economy populated by a. large number of households with preferences given by the lifetime utility function 11101 + in 02 + in 03, Where Cl, C2, and C3 denote, respectively, consumption in periods 1, 2, and 3. Suppose that households receive exogenous endowments of goods given by Q1, Q2, and Q3 in periods 1, 2, and 3, respectively. Every household enters period 1 with an asset position, including interest, equal to (1 | TQJBS, where m denotes the interest rate prevailing in period 0. Finally, suppose that the country enjoys free capital mobility and that the world interest rate is constant over time and equal to 7"\". 5. Assume that in period 1 the economy receives a temporary increase in the endowment equal to AQ > D, that is, assmne that Q1 increases by AQ and that Q2 and Q3 remain unchanged. Calculate the changes in consumption, the trade balance, and the current account in period 1, denoted A01, ATB1, and ACAl, respectively. 6. Now assume that the endowment shock is permanent, that is, the en- dowments in periods 1, 2, and 3 all increase by AQ > 0. Calculate the changes in consumption, the trade balance, and the current account in period 1. 7. Compare your answers to the ones obtained in the two-period economy. 8. Answer questions 5 and 6 in the general case of a Tperiod economy, where T is any integer larger than 2