Mi amigo duerme mal cuando hay mucho ruido.

Because mi here is a possessive adjective meaning my, and it has no accent.

• mi amigo = my friend
• mí with an accent is a pronoun used after prepositions:
  • para mí = for me
  • a mí = to me

So in this sentence, mi amigo is correct.

In Spanish, possessive adjectives like mi, tu, su, nuestro normally replace the article.

So you say:

• mi amigo = my friend
• not normally el mi amigo

This is different from English only in structure, not meaning. The possessive already makes the noun specific enough.

Because the verb is dormir and it is a stem-changing verb in the present tense.

The o in the stem changes to ue in most present forms:

• duermo
• duermes
• duerme
• dormimos
• dormís
• duermen

So mi amigo duerme means my friend sleeps.
The form dorme is not correct in standard Spanish.

Because mal is an adverb, and it modifies the verb duerme.

• mal = badly / poorly
• malo = bad

After a verb, if you want to describe how someone does something, you usually need an adverb:

• duerme mal = sleeps badly
• habla bien = speaks well

Malo is an adjective, so it describes a noun, not the action itself.

Hay is the impersonal form of haber meaning there is or there are.

So:

• hay mucho ruido = there is a lot of noise

Spanish uses hay to say that something exists or is present.

Compare:

• Hay mucho ruido. = There is a lot of noise.
• El ruido está aquí. = The noise is here.

Here the sentence is simply saying that a lot of noise exists, so hay is the right choice.

Because ruido is usually treated as an uncountable noun when you mean noise in general.

• mucho ruido = a lot of noise

This is similar to English, where we usually say a lot of noise, not many noises, unless we mean separate sounds or types of sounds.

You can say ruidos in some contexts, but it changes the idea:

• mucho ruido = a lot of noise in general
• muchos ruidos = many noises / many different sounds

In this sentence, the general idea is more natural.

Because cuando has no accent when it is used as a conjunction meaning when.

• cuando hay mucho ruido = when there is a lot of noise

It takes an accent — cuándo — in questions or exclamations:

• ¿Cuándo viene? = When is he coming?
• No sé cuándo viene. = I don’t know when he is coming.

So in your sentence, no accent is needed.

Because Spanish often uses the present tense for general truths, habits, and things that usually happen.

This sentence describes a regular situation:

• Mi amigo duerme mal cuando hay mucho ruido.

That means this is what generally happens whenever there is a lot of noise. English does the same here with the simple present: My friend sleeps badly when there is a lot of noise.

You can often omit subjects in Spanish if the context makes them clear, because the verb form already gives information.

For example:

• Duerme mal cuando hay mucho ruido.

This could mean He sleeps badly when there is a lot of noise, if it is already clear who he is.

But in your sentence, mi amigo is included because the speaker wants to identify the person clearly. That is very normal.

The normal word order is:

• verb + adverb
• duerme mal

Spanish does allow changes in word order for emphasis or style, but mal duerme would sound marked, poetic, or unusual in ordinary speech.

So for a neutral sentence, duerme mal is the standard choice.

Yes. Amigo is grammatically masculine, and in many contexts it simply means friend when referring to a male person.

• mi amigo = my male friend
• mi amiga = my female friend

In modern usage, whether it means friend or boyfriend depends completely on context. On its own, mi amigo normally just means my friend.

In Spanish, h is silent.

So hay is pronounced roughly like the English word eye for many learners, although the exact vowel/glide is Spanish.

That means:

• hay → the h is not pronounced at all

This is true in standard Spanish from Spain as well.