Question 1,056 of 1,170

Deploy and Manage Azure Compute →mediumMultiple ChoiceObjective-mapped

Quick Answer

The answer is to enable a system-assigned managed identity on the VM and grant it the appropriate Key Vault access policy. This works because a system-assigned managed identity creates an automatically managed service principal in Entra ID that is tied directly to the VM’s lifecycle, allowing the VM to authenticate to Key Vault via the Azure Instance Metadata Service (IMDS) endpoint without ever storing passwords, certificates, or client secrets on the disk. On the AZ-104 exam, this scenario tests your understanding of secure credentialless authentication for first-boot scenarios, and a common trap is choosing to store a certificate or use a service principal with a secret, which violates the security policy. Remember the key phrase: “managed identity key vault vm first boot” — the identity is system-assigned because it lives and dies with the VM, and the access policy on the vault is what grants the secret retrieval permissions. A helpful memory tip: think “System Syncs with Startup” — the system-assigned identity is automatically available the moment the VM boots, so no manual credential injection is needed.

AZ-104 Deploy and Manage Azure Compute Practice Question

This AZ-104 practice question tests your understanding of deploy and manage azure compute. This is a configuration task: choose the command set that satisfies every stated requirement. Small differences — like 'secret' vs 'password' or 'transport input ssh' vs 'all' — change whether the answer is correct. 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 Windows Azure VM must download configuration data from Azure Key Vault during first boot. Security policy forbids storing passwords, certificates, or client secrets on the VM. What should the administrator configure?

Clue words in this question

Noticing these words before you look at the options changes how you read each choice.

Clue: "first"
Why it matters: Order matters here. You are being tested on which action comes before the others — not which action is generally useful.

Question 1mediummultiple choice

Full question →

A
Create a service principal and place its secret in the VM's startup script.
Why wrong: This requires a long-lived secret on the VM, which violates the security requirement and increases exposure.
B
Enable a system-assigned managed identity on the VM and grant it Key Vault access.
A system-assigned managed identity gives the VM an automatically managed identity with no stored credentials. The VM can authenticate to Key Vault through Azure AD and receive only the permissions it needs. Because the identity is tied to the VM lifecycle, it is ideal for first-boot configuration tasks that must avoid passwords, certificates, and client secrets.
C
Attach a custom script extension that embeds the Key Vault password in plain text.
Why wrong: Embedding a password in a script creates exactly the credential storage problem the question says to avoid.
D
Use an Entra ID user account and sign in interactively after deployment.
Why wrong: Interactive sign-in is not suitable for unattended startup tasks and does not provide automation-friendly access.

Full breakdown with real-world context →

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

✓

Enable a system-assigned managed identity on the VM and grant it Key Vault access.

A system-assigned managed identity provides an automatically managed service principal in Entra ID, tied to the VM's lifecycle. Granting this identity the appropriate Key Vault access policy (e.g., Get, List secrets) allows the VM to authenticate to Key Vault without any stored credentials, satisfying the security policy. The VM can then retrieve configuration data during first boot using the Azure Instance Metadata Service (IMDS) endpoint.

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.

✗
Create a service principal and place its secret in the VM's startup script.
Why it's wrong here
This requires a long-lived secret on the VM, which violates the security requirement and increases exposure.
✓
Enable a system-assigned managed identity on the VM and grant it Key Vault access.
Why this is correct
A system-assigned managed identity gives the VM an automatically managed identity with no stored credentials. The VM can authenticate to Key Vault through Azure AD and receive only the permissions it needs. Because the identity is tied to the VM lifecycle, it is ideal for first-boot configuration tasks that must avoid passwords, certificates, and client secrets.
Clue confirmation
The clue word "first" in the question point toward this answer.
Related concept
Read the scenario before looking for a memorised answer.
✗
Attach a custom script extension that embeds the Key Vault password in plain text.
Why it's wrong here
Embedding a password in a script creates exactly the credential storage problem the question says to avoid.
✗
Use an Entra ID user account and sign in interactively after deployment.
Why it's wrong here
Interactive sign-in is not suitable for unattended startup tasks and does not provide automation-friendly access.

Common exam traps

Common exam trap: answer the scenario, not the keyword

The trap here is that candidates may think a service principal with a stored secret (Option A) is required for automated access, overlooking that managed identities eliminate the need for any stored 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 automatically when the VM is provisioned. The VM's IMDS endpoint (169.254.169.254) provides an access token for this identity, which can be used to authenticate to Key Vault via REST API calls (e.g., using the Azure SDK or PowerShell cmdlets like `Get-AzKeyVaultSecret`). A subtle behavior is that the identity is tied to the VM's resource ID; if the VM is deleted, the identity is automatically cleaned up, preventing orphaned principals.

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 company's IT admin needs to give a contractor read-only access to production logs without sharing account credentials. Using role-based access control (RBAC) and temporary scoped permissions — not a permanent shared password — is the correct pattern. Questions like this test whether you can apply least-privilege access across cloud identity services.

What to study next

Got this wrong? Here's your next step.

Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.

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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: Enable a system-assigned managed identity on the VM and grant it Key Vault access. — A system-assigned managed identity provides an automatically managed service principal in Entra ID, tied to the VM's lifecycle. Granting this identity the appropriate Key Vault access policy (e.g., Get, List secrets) allows the VM to authenticate to Key Vault without any stored credentials, satisfying the security policy. The VM can then retrieve configuration data during first boot using the Azure Instance Metadata Service (IMDS) endpoint.

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.

Are there clue words in this question I should notice?

Yes — watch for: "first". Order matters here. You are being tested on which action comes before the others — not which action is generally useful.

What is the key concept behind this question?

Read the scenario before looking for a memorised answer.

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