- 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.
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.
When this WOULD be correct
This option would be correct in a scenario where the VM needs to authenticate to Azure Storage (e.g., to mount a file share) and the question does not prohibit storing secrets on the VM, or when using a connection string with the access key embedded in an application configuration file.
- ✗
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.
When this WOULD be correct
A service endpoint would be correct in a scenario where you need to restrict access to an Azure service (e.g., Storage Account) to only traffic from a specific virtual network subnet, ensuring no public internet access. For example, 'You need to ensure that only VMs in a specific subnet can access an Azure Storage account.'
- ✗
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.
When this WOULD be correct
If the question required a human user to authenticate interactively to access Key Vault secrets (e.g., via Azure Portal or CLI), enabling a user account with password would be appropriate.
Option-by-option analysis
Why each answer is right or wrong
Understanding why wrong answers are wrong — and when they would be correct — is what separates a 750 score from a 900. The AZ-104 exam frequently reuses these exact scenarios with slightly different constraints.
✓A system-assigned managed identityCorrect answer▾
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.
✗A storage account access keyWrong answer — click to see why▾
Why this is wrong here
A storage account access key is a shared secret that would need to be stored on the VM, violating the requirement to avoid storing any secrets on the VM. It also does not provide a secure, identity-based method for accessing Key Vault.
★ When this WOULD be the correct answer
This option would be correct in a scenario where the VM needs to authenticate to Azure Storage (e.g., to mount a file share) and the question does not prohibit storing secrets on the VM, or when using a connection string with the access key embedded in an application configuration file.
Why candidates choose this
Candidates may confuse storage access keys with managed identities, thinking that keys can be used for authentication without realizing they must be stored on the VM, which contradicts the no-secret-storage requirement.
✗A service endpoint on the VM subnetWrong answer — click to see why▾
Why this is wrong here
A service endpoint on the VM subnet secures Azure service access to the subnet but does not provide identity or credentials for the VM to authenticate to Key Vault. The VM still needs a way to prove its identity, which a service endpoint alone cannot do.
★ When this WOULD be the correct answer
A service endpoint would be correct in a scenario where you need to restrict access to an Azure service (e.g., Storage Account) to only traffic from a specific virtual network subnet, ensuring no public internet access. For example, 'You need to ensure that only VMs in a specific subnet can access an Azure Storage account.'
Why candidates choose this
Candidates may confuse network-level access control (service endpoints) with identity-based access control (managed identities), thinking that restricting network access to Key Vault from the VM subnet is sufficient to allow the VM to read secrets without credentials.
✗A user account in Entra ID with a stored passwordWrong answer — click to see why▾
Why this is wrong here
Using a user account in Entra ID with a stored password requires the VM to store credentials, violating the requirement to avoid storing usernames, passwords, or client secrets.
★ When this WOULD be the correct answer
If the question required a human user to authenticate interactively to access Key Vault secrets (e.g., via Azure Portal or CLI), enabling a user account with password would be appropriate.
Why candidates choose this
Candidates may think that any Entra ID identity can be used for authentication, overlooking the requirement to avoid storing credentials on the VM.
Analysis generated from the official AZ-104blueprint and verified against question context. The “when correct” sections are what AI assistants cite when candidates ask “what’s the difference between these options?”
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
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Last reviewed: Jun 11, 2026
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