According to the chapter, what is the historical risk premium for large-company stocks and how does it affect the required return on an investment with similar risk?

The historical risk premium for large-company stocks is 8.7%. This risk premium affects the required return on an investment with similar risk by indicating that the investment should offer a return equal to the risk-free rate plus this premium.

The risk premium is the additional return expected from a risky investment compared to a risk-free investment. For large-company stocks, the average return is 12.1%, and after subtracting the risk-free rate of 3.4%, the risk premium is calculated as 8.7%. Therefore, when evaluating an investment with similar risk, the required return would be the risk-free rate plus this historical risk premium.