In year 1, Sharon loaned her friend Christina $10,000 to start a new business.

The loan was documented by a signed note, at market interest rate, and required repayment in two years. Christina appeared successful at first but her office manager embezzled a large amount of money, causing Christina to declare bankruptcy in year 2. In year 3 Sharon recovers only $1,000 of the $10,000 she loaned to Christina.

AppendixLO1