Configuring NPS for EAP-MSCHAPv2

Hi:

I am trying to configure Windows 2012 R2 Standard Server for EAP-MSCHAPv2 (password based) authentication. I have created NPS with network policies.

Apparently, it only seems to work when "Unencrypted authentication (PAP, SPAP)" is selected. By working, I mean, I have a test utility NTRADPing that sends authentication request to the server. In this case, the server accepts the authentication. But with EAP-MSCHAPv2, it rejects.

Any idea what might be happening here? Do I need to set anything specific for EAP-MSCHAPv2 to work? Has anybody tried this? Is there any other utility to test this specific method?

Thanks in advance!

SYED