- A
A system-assigned managed identity
A system-assigned managed identity gives the VM an Azure-managed identity that can authenticate to Azure services without embedded credentials. It is tied to the VM’s lifecycle, so there is no secret to rotate or store on the operating system. This is the simplest secure choice when one VM needs to access Key Vault and the identity should exist only while the VM exists.
- B
A storage account access key
Why wrong: A storage account key is unrelated to Key Vault authentication and would require storing a long-lived secret on the VM. It does not solve the requirement to avoid usernames, passwords, or client secrets. It is also broader than necessary and weakens security because the key can be reused outside the VM if exposed.
- C
A service endpoint on the VM subnet
Why wrong: A service endpoint affects network routing and service access control, not identity authentication. It can help a VM reach certain Azure services securely over the Azure backbone, but it does not provide the VM with a credential-free identity. Key Vault access still needs an authentication method such as managed identity.
- D
A user account in Entra ID with a stored password
Why wrong: A user account with a password still requires the VM or application to store a credential, which violates the requirement. It also creates extra operational work for password management and rotation. Managed identities are the Azure-native way to eliminate this problem for a single VM.
Quick Answer
The answer is to enable a system-assigned managed identity on the Linux VM. This is correct because a system-assigned managed identity allows the VM to authenticate to Azure Key Vault without storing any credentials, as Azure automatically creates a service principal in Entra ID and the VM can obtain an access token from the Azure Instance Metadata Service (IMDS) endpoint at 169.254.169.254. On the AZ-104 exam, this scenario tests your understanding of how to securely access key vault from VM without credentials, often appearing as a direct question about eliminating stored secrets. A common trap is choosing a user-assigned managed identity or a service principal with a client secret, but the requirement for zero stored credentials points specifically to system-assigned. Memory tip: think "system-assigned = zero secrets stored, just like the VM's own identity is automatically managed by Azure."
AZ-104 Deploy and Manage Azure Compute Practice Question
This AZ-104 practice question tests your understanding of deploy and manage azure compute. Match the stated requirement to the specific cloud service, access model, or configuration option — many options are valid in isolation but not for this scenario. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A team deploys a Linux VM that must read secrets from Azure Key Vault without storing any usernames, passwords, or client secrets on the VM. What should the administrator enable on the VM?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
A system-assigned managed identity
A system-assigned managed identity enables the Linux VM to authenticate to Azure Key Vault without any stored credentials. Azure automatically creates a service principal in Entra ID for the VM, and the VM can obtain an access token from the Azure Instance Metadata Service (IMDS) endpoint (169.254.169.254) to authenticate to Key Vault. This eliminates the need to store usernames, passwords, or client secrets on the VM.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
A system-assigned managed identity
Why this is correct
A system-assigned managed identity gives the VM an Azure-managed identity that can authenticate to Azure services without embedded credentials. It is tied to the VM’s lifecycle, so there is no secret to rotate or store on the operating system. This is the simplest secure choice when one VM needs to access Key Vault and the identity should exist only while the VM exists.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
A storage account access key
Why it's wrong here
A storage account key is unrelated to Key Vault authentication and would require storing a long-lived secret on the VM. It does not solve the requirement to avoid usernames, passwords, or client secrets. It is also broader than necessary and weakens security because the key can be reused outside the VM if exposed.
- ✗
A service endpoint on the VM subnet
Why it's wrong here
A service endpoint affects network routing and service access control, not identity authentication. It can help a VM reach certain Azure services securely over the Azure backbone, but it does not provide the VM with a credential-free identity. Key Vault access still needs an authentication method such as managed identity.
- ✗
A user account in Entra ID with a stored password
Why it's wrong here
A user account with a password still requires the VM or application to store a credential, which violates the requirement. It also creates extra operational work for password management and rotation. Managed identities are the Azure-native way to eliminate this problem for a single VM.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates often confuse service endpoints (which control network access) with managed identities (which provide identity-based access), leading them to select option C thinking it secures the VM's access to Key Vault without credentials.
Detailed technical explanation
How to think about this question
Under the hood, the system-assigned managed identity creates a service principal in Entra ID that is tied to the VM's lifecycle. The VM requests a token from the IMDS endpoint using a non-routable IP (169.254.169.254) with an Azure-specific header; the token is then used in the Authorization header of Key Vault REST API calls (e.g., GET /secrets/{name}?api-version=7.0). A subtle behavior is that the token expires every 8 hours by default, and the Azure SDK automatically refreshes it, but custom scripts must handle token renewal if using raw REST calls.
KKey Concepts to Remember
- Read the scenario before looking for a memorised answer.
- Find the constraint that changes the correct option.
- Eliminate answers that are true in general but not in this case.
TExam Day Tips
- Watch for words such as best, first, most likely and least administrative effort.
- Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A media company stores terabytes of video archives that are accessed once a year for audit purposes. Moving these objects to a cold storage tier (Azure Archive, S3 Glacier, or Google Nearline) costs a fraction of hot storage. Questions like this test whether you understand storage tiers, access frequency tradeoffs, and retrieval latency requirements.
What to study next
Got this wrong? Here's your next step.
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FAQ
Questions learners often ask
What does this AZ-104 question test?
Deploy and Manage Azure Compute — This question tests Deploy and Manage Azure Compute — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: A system-assigned managed identity — A system-assigned managed identity enables the Linux VM to authenticate to Azure Key Vault without any stored credentials. Azure automatically creates a service principal in Entra ID for the VM, and the VM can obtain an access token from the Azure Instance Metadata Service (IMDS) endpoint (169.254.169.254) to authenticate to Key Vault. This eliminates the need to store usernames, passwords, or client secrets on the VM.
What should I do if I get this AZ-104 question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
About these practice questions
Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
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Last reviewed: Jun 11, 2026
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