What are equity securities?

Equity securities represent ownership shares in a corporation, making option B the correct choice. When investors purchase equity securities, they are acquiring a stake in the company, which typically entitles them to a portion of the company's profits through dividends and voting rights at shareholder meetings. This ownership gives investors a claim on the assets and earnings of the corporation, distinguishing equity securities from other financial instruments that do not convey ownership, such as debt instruments.

Debt instruments, as mentioned in the first choice, are obligations that require the issuer to repay borrowed funds, and therefore do not provide ownership rights. Real estate investment trusts, while they may involve shares that act like equity securities, specifically focus on real estate investments rather than direct ownership in a corporation. Similarly, financial derivatives based on stock values involve contracts that derive their value from the performance of stocks but do not represent ownership in the underlying companies. Thus, equity securities squarely align with the definition provided in the correct answer choice.