Both should be accepted

Because meaning is often implied, it could be both. But youre right that this course seems to favor literal translations.

I agree.

According to wiktionary, it seems to be both. I guess it will depend context for which is being implied.

In this case, 친구에게 implies lending.

I think 빌리다 is to borrow and 빌려주다 is to lend. I think of it as 빌리다+주다(give) to kind of say "let you borrow ...", or as "gives you ... to borrow"