Demand deposits are a costless source of funds and have a high degree of withdrawal risk.

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Demand deposits, while often considered a cheaper source of funds for banks compared to other forms of borrowing, are not costless. Banks typically incur costs related to account maintenance and providing services to depositors. Additionally, demand deposits do have a high degree of withdrawal risk, as depositors can withdraw their funds at any time without prior notice.

Demand Deposits Are a Costless Source of Funds and Have