Risk-Free Return

No risk. As in: "We are nuked if this borrower doesn't pay back the principal they've borrowed, so then we don't care, because we are glowing, or in cahoots with the White Walkers."

The risk-free return is the likely very low interest rate that the U.S. Government would pay you to rent money from you for whatever period of time. It's a Thing, because most other debt is then pegged to the price of renting U.S. Gov paper, i.e. its rent is higher. So a high quality S&P 500 company might borrow money for 3%, whereas the U.S. Gov might be borrowing at 2.7% for the same 5-year duration, or something like that. The risk-free rate sets the base cost of renting that money, and then the S&P 500 company's debt is said to be priced at a spread premium of 30 basis points in this example.

See: Spread to Treasuries.