Consider the Following Situation in the Canadian Banking System

Consider the following situation in the Canadian banking system:
∙ The Bank of Canada purchases $5 million worth of government securities
from an investment dealer with a cheque drawn on the Bank of Canada.
∙ The dealer deposits this cheque at Bank XYZ,a commercial bank.
∙ The target reserve ratio for all commercial banks is 25%.
∙ All commercial banks operate with no excess reserves.
∙ There is no cash drain.
TABLE 26-4
-Refer to Table 26-4.If Bank XYZ increases its loans to the maximum extent possible with its new excess reserves,the second-generation banks will be able to expand their loans by

A) $0.94 million.
B) $1.00 million.
C) $1.50 million.
D) $2.81 million.
E) $3.75 million.