Purchase Price

AAA

DEFINITION of 'Purchase Price'

The price that an investor pays for a security. This price is important as it is the main component in calculating the returns achieved by the investor.

Essentially, it can be thought of as the price that is paid for anything that is bought.

INVESTOPEDIA EXPLAINS 'Purchase Price'

For example, if an investor buys Ford stock at $15, then this would be the purchase price. When looking at the return on the investment, the investor would compare the purchase price of $15 to the price the investment was sold at or the current market price for Ford.

Purchase price can also refer to the price that a company pays for an item, such as another company. For example, if Ford bought Kia for $3.5 billion, this would be Ford's purchase price.

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  3. Ask

    The price a seller is willing to accept for a security, also ...
  4. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  5. Return

    The gain or loss of a security in a particular period. The return ...
  6. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
RELATED FAQS
  1. If I own stock that drops in price is this a sign that I should buy more?

    This is a good question, and the answer has two parts. First, let's address the concept underlying the strategy to which ... Read Full Answer >>
  2. If the stock market is so volatile, why would I want to put my money into it?

    In this question, volatility refers to the upward and downward movement of price. The more prices fluctuate, the more volatile ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Investing

    The Art Of Selling A Losing Position

    Knowing whether to sell or to hold is tough. And no rule fits all. Find out what to consider.
  3. Options & Futures

    Conversion Arbitrage

    This stock/options combination helps traders take advantage of market mispricing. Find out how.
  4. Investing

    What does Large Cap mean?

    The “cap” in large cap refers to a company’s capitalization as determined by the total market value of its publicly traded shares. Large cap is short for “large market capitalization.”
  5. Investing Basics

    Understanding Risk Averse Investing

    Risk averse describes a low level of risk an investor is willing to accept on his investments. An investor who is risk averse prefers little risk and is willing to accept a lower return because ...
  6. Investing Basics

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  7. Investing Basics

    What's a Closed-End Fund?

    A closed-end fund is a mutual fund that has an initial offering (IPO) of shares, and once those shares are sold, no additional shares are issued. Since it is a public offering, closed-end funds ...
  8. Investing News

    Millennial Investing Techniques Are Changing The Game

    Millennials are taking advantage of social media and a variety of high-tech tools to plow their wealth into investment vehicles of their choice.
  9. Investing

    Ten Worst Mistakes Beginner Investors Make

    Here are the ten worst mistakes beginning investors make.
  10. Investing

    What does Investment Grade Mean?

    Investment grade is a term used to describe a favorable rating for corporate and municipal bonds.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center