Price also agreed to not serve as an officer or director of a public company for 18 months, according to the settlement agreement.
The agreement ends the 2010 case against former Chief Executive Kenneth Lewis, Price and Bank of America linked to the 2008 global financial crisis. The bank and Lewis settled with New York Attorney General Eric Schneiderman last month.
New York accused the bank's executives of concealing Merrill's mounting losses from Bank of America shareholders prior to a December 5, 2008 vote on the merger, and misrepresenting the impact the merger would have on the bank's future earnings.
"This settlement is one more step in our effort to hold top financial executives accountable for their actions," Schneiderman said in a statement.
The bank paid the $7.5 million for Price, according to his attorney William Jeffress, who added that his client decided to settle to because of the toll it was taking on him and his family.
"He has denied wrongdoing all along and still denies it," Jeffress said.
Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, declined comment on the settlement.
Lewis agreed in March to pay $10 million to resolve claims against him for misleading shareholders and the government in order to complete the Merrill Lynch merger.
Bank of America agreed to pay $15 million to resolve its portion of the lawsuit by Schneiderman, who inherited the case from his predecessor Andrew Cuomo, now New York's governor.
All three payments are to cover the cost of the investigation and prosecution, according to the settlements. Neither the executives nor the bank admit wrongdoing.
A separate $2.43 billion shareholder class action settlement won final approval last year.
The latest settlement was first reported by the Wall Street Journal.
The case is People v Bank of America Corp, et al, New York State Supreme Court, New York County, No. 450115/2010.
(Reporting by Karen Freifeld in New York. Additional reporting by Supriya Kurane in Bangalore; Editing by Gopakumar Warrier and Meredith Mazzilli)
By Karen Freifeld