FreeBSD sed requires an argument after -i to rename the original file to. For example sed -i .orig 's/../../' file will rename he original file to file.orig, and save the modified file to file.
This is different from GNU sed, which doesn't require an argument for the -i flag. See sed(1) for the full documentation. This is one of those useful extensions to the POSIX spec which is unfortunately implemented inconsistently.
Right now, the "s/private_key_password = .*/private_key_password = test/" parts gets interpreted as an argument to -i, and /usr/local/etc/raddb/mods-available/eap gets interpreted as the command. Hence the error.
So you want to use:
sed -i .orig "s/private_key_password = .*/private_key_password = test/" /usr/local/etc/raddb/mods-available/eap
You can then check if the changes are okay with diff and remove /usr/local/etc/raddb/mods-available/eap.orig if they are.