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%