For a futures index, you are given that:

i) the time-t value of the index is F(t)

ii) F(0) = 75

iii) The index's volatility is 35%

iv) The continuously compounded risk-free interest rate is 10%

A European gap call option has a time-1 payoff of F(1) - K if F(1) > 85, and is 0 otherwise.

Given that the current price of the gap call is 0, find K.

____________________________

A) 99

B) 102

C) 105

D) 108

E) 111