Adam has just graduated, and has a good job at a decent starting salary. He hopes to purchase his first new car. The car that Adam is considering costs $45,000. The dealer has given him three payment options:

1. Zero percent financing. Make a $7,000 down payment from his savings and finance the remainder with a 0% APR loan for 48 months. Adam has more than enough cash for the down payment, thanks to generous graduation gifts.

2. Rebate with no money down. Receive a $5,500 rebate as a discount on the car from car dealer and finance the rest with a standard 48-month loan, with an 8% APR. He likes this option, as he could think of many other uses for the $7,000 of his saving.

3. Pay cash in full. Although Adam doesnt have $45,000, he still wants to evaluate this option. His parents always paid cash when they bought a family car; Adam wonders if this really was a good idea.

2. Suppose that, similar to his parents, Adam had plenty of cash in the bank so that he could easily afford to pay cash for the car without running into debt now or in the foreseeable future. If his cash earns interest at a 5.4% APR (based on monthly compounding) at the bank, what would be his best purchase option for the car?