To solve this, let's go through the first step of the insertion sort on the list [7, 3, 5, 9, 6].

1. Insertion sort starts by assuming the first element (7) is sorted, so the algorithm moves to the second element (3) and checks if it needs to be placed before 7.

2. Comparing 3 and 7: Since 3 is smaller than 7, we swap them to put 3 in the correct sorted position relative to 7.

After this step, the list becomes [3, 7, 5, 9, 6].

The correct answer is therefore C. 37596.

Would you like further details or have any questions? Here are some related questions:

1. What is insertion sort, and how does it work in detail?
2. How many steps does it take to fully sort the list [7, 3, 5, 9, 6]?
3. How does insertion sort compare to other sorting algorithms, like bubble sort?
4. Can insertion sort be optimized for larger lists?
5. What is the time complexity of insertion sort?

Tip: Insertion sort is generally efficient for small or nearly sorted lists.