Doubt from nucleophilic substitution reaction

Answer is 3
But option 2 should also be answer according to me

Whether option 2 is correct or not is decided whether it shows Sn1 reaction or not, so will it show Sn1 reaction? (In the first step)

The first step should be SN2 not SN1 as KOH is a strong base.

Grignard reagent is usually used with carbonyl compounds and it's attack on OH is of no use apart from abstraction of acidic hydrogen.

As the first step is wrong the entire reaction wouldn't proceed in the way you have written.