Translation:Talk on the phone with your grandmother!
Except that there is a difference: "Call/phone your grandmother" means pick up the phone and dial the number, while "Speak to your grandmother on the phone" suggests an exasperated parent holding out the phone to a shy/rebellious child while Gran waits eagerly on the other side to hear the much-loved voice taking its turn to wish her a happy birthday!
Unfortunately, 1st conjugation verbs (-are) show no distinction between 2nd singular imperative and 3rd singular indicative present: "parla" can both mean "(you sing.) talk!" and "he/she/it talks". For 2nd and 3rd conjugation (-ere and -ire respectively), ambiguity is between 2nd singular imperative and 2nd singular indicative present: "dormi" can both mean "(you sing.) sleep!" or "you (sing.) sleep). For 2nd plural, imperative is the same as indicative present: "parlate"/"dormite" can be both, you can distinguish only by context.
It's because it's in the imperative form, which is used to give orders. Read this article http://italian.about.com/library/weekly/aa011900a.htm
I think I saw someone comment that nonna isn't a term which has been (affectionately or informally) shortened, so (the comment concluded, roughly) grandmother (more formal) is the more appropriate translation. I think they gave another term for an affectionate shortening, but I don't remember it (unfortunately) because Duolingo hasn't presented it for contrast against grandmother in exercises.
So, nan, nanna, nanny, gran, granny, etc, might not ever be accepted.
Plus an observation on Duolingo's error reporting mechanism:
If no-one feeds back to us on the individual sentence threads why a particular translation might not be accepted, we really have no way of knowing that we are putting in an erroneous report. I said at the start of this: "I think I saw someone comment ..." but memory is infallible, and I'm not bilingual, so maybe I didn't see it - I don't want to make an erroneous error report, but until the fact is firmly fixed in my mind, shouldn't I report variants I think might be valid?
I haven’t come across one in three years of regular Italian classes. Nonna is as short as it gets. They don’t seem to have the sequence grandmother, grandma, granny, nanna that English has. But for sure there are variants. Vecchia is mentioned as a disparaging version - meaning “oldster” (female).
Please report problems such as this one by using the "Report a problem" button when you encounter them during your lesson/practice. This will help the DL Italian crew improve things as efficiently as possible. Complaining about them here is not really useful, unless you are in doubt and clearly state a request for advice/discussion.