Mack compiles pricing data for a list of annual pay bonds (Exhibit 1). Each of the bonds will mature in two years, and Mack considers the bonds as being risk-free; both the one-year and two-year benchmark spot rates are 3%. Mack calculates the arbitrage-free prices and identifies an arbitrage opportunity to recommend to her team.

a) Based on Exhibit 1, which of the following bonds most likely includes an arbitrage opportunity? b) How much is the arbitrage amount?

EXHIBIT 1 Market Data for Selected Bonds Asset Bond G Bond H Bond J Coupon 2% 4% 690 Market 97.80 101.91 105.74