(i) There was an old blanket into the iron chest.

(ii) The shepherd always carried it as he considered it to be his oldest and most trustworthy friend. He also was certain that the blanket will protect him from cold even if the king decides to take away the new cloaks.

(iii) It is an example of both. The shepherd was now a governor and still carried an old blanket with himself while he could afford new fancy ones; this shows his humility. He understood the fact that his position might me lost someday and thus kept the blanket as a reserve resource; this shows his wisdom.