You Want to Borrow $1,000 from a Friend for One

Multiple Choice

You want to borrow $1,000 from a friend for one year,and you propose to pay her $1,120 at the end of the year.She agrees to lend you the $1,000,but she wants you to pay her $10 of interest at the end of each of the first 11 months plus $1,010 at the end of the 12th month.How much higher is the effective annual rate under your friend's proposal than under your proposal?

A) 0.00%
B) 0.45%
C) 0.68%
D) 0.89%
E) 1.00%