The Nernst equation determines cell potential under non-standard conditions. It is expressed as:
\[
E_{{cell}} = E_{{cell}}^o - \frac{RT}{nF} \ln \frac{[{products}]}{[{reactants}]}
\]
For this reaction, \( n = 2 \). The cell potential is contingent on the ion concentration ratio. Consequently, the Nernst equation is:
\[
E_{{cell}} = E_{{cell}}^o - \frac{RT}{2F} \ln \frac{[{Mg}^{2+}]}{[{Ag}^+]}
\]
Option (3) is therefore correct.