The answer is to configure Azure SQL Database Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault and set a key rotation policy to auto-renew every 90 days. This solution satisfies all requirements because TDE with customer-managed keys encrypts the entire database at rest using a key stored in Key Vault, while the automatic rotation policy handles the 90-day renewal without manual intervention, and Azure SQL Database accesses the key on behalf of the application, preventing direct application access. On the AZ-500 exam, this scenario tests your ability to distinguish between encryption options: TDE with customer-managed keys is the only choice that combines database-level encryption, automatic rotation, and service-trusted access, whereas Always Encrypted forces the application to manage keys, and Azure Disk Encryption only protects VM disks. A common trap is confusing TDE with Always Encrypted—remember that TDE encrypts the whole database transparently, while Always Encrypted encrypts specific columns but requires client-side key handling. Memory tip: "TDE with AKV auto-rotation = database encryption without app key access."
AZ-500 Secure compute, storage, and databases Practice Question
This AZ-500 practice question tests your understanding of secure compute, storage, and databases. 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.
You are a security engineer for Contoso Ltd., a multinational company that uses Azure extensively. The company has a custom line-of-business application hosted on Azure VMs. The application stores sensitive customer data in Azure SQL Database. The security policy requires: (1) All data at rest must be encrypted using customer-managed keys stored in Azure Key Vault. (2) Encryption keys must be rotated automatically every 90 days. (3) Access to the keys must be audited. (4) The application must not have direct access to the key vault; only Azure services should access keys on behalf of the application. You need to recommend a solution. What should you do?
Use Azure Storage Service Encryption with Microsoft-managed keys for the database backup.
Why wrong: Service-managed keys do not use customer-managed keys.
B
Enable Azure Disk Encryption on the VMs and store keys in Azure Key Vault.
Why wrong: Disk Encryption protects VM disks, not the SQL database.
C
Configure Azure SQL Database Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault and set key rotation policy to auto-renew every 90 days.
TDE with CMK meets all requirements.
D
Implement Always Encrypted with column encryption keys stored in Azure Key Vault.
Why wrong: Always Encrypted requires the application to manage encryption keys, violating requirement 4.
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Configure Azure SQL Database Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault and set key rotation policy to auto-renew every 90 days.
Option C is correct because Transparent Data Encryption (TDE) with customer-managed keys in Key Vault meets all requirements: encryption at rest, automatic rotation with Key Vault's key rotation policy, and access by Azure SQL Database without application direct access. Option A is wrong because Always Encrypted encrypts columns but requires the application to handle encryption keys. Option B is wrong because Azure Disk Encryption encrypts VM disks, not SQL database. Option D is wrong because server-side encryption with service-managed keys does not use customer-managed keys.
Key principle: NAT direction and interface roles matter as much as the IP address mapping. Inside/outside designation controls which traffic is translated.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
✗
Use Azure Storage Service Encryption with Microsoft-managed keys for the database backup.
Why it's wrong here
Service-managed keys do not use customer-managed keys.
✗
Enable Azure Disk Encryption on the VMs and store keys in Azure Key Vault.
Why it's wrong here
Disk Encryption protects VM disks, not the SQL database.
✓
Configure Azure SQL Database Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault and set key rotation policy to auto-renew every 90 days.
Why this is correct
TDE with CMK meets all requirements.
Related concept
Static NAT maps one inside address to one outside address.
✗
Implement Always Encrypted with column encryption keys stored in Azure Key Vault.
Why it's wrong here
Always Encrypted requires the application to manage encryption keys, violating requirement 4.
Common exam traps
Common exam trap: NAT rules depend on direction and matching traffic
NAT is not only about the public address. The inside/outside interface roles and the ACL or rule that matches traffic are just as important.
Detailed technical explanation
How to think about this question
NAT questions usually test address translation, overload/PAT behaviour, static mappings and whether the right traffic is being translated. Read the interface direction and address terms carefully.
KKey Concepts to Remember
Static NAT maps one inside address to one outside address.
PAT allows many inside hosts to share one public address using ports.
Inside local and inside global describe the private and translated addresses.
NAT ACLs identify traffic for translation, not always security filtering.
TExam Day Tips
→Identify inside and outside interfaces first.
→Check whether the scenario needs static NAT, dynamic NAT or PAT.
→Do not confuse NAT matching ACLs with normal packet-filtering intent.
Key takeaway
NAT direction and interface roles matter as much as the IP address mapping. Inside/outside designation controls which traffic is translated.
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.
Related glossary terms
Concepts from this question explained
These glossary pages explain the core terms tested in this AZ-500 question in full detail.
Review the four NAT address types (inside local, inside global, outside local, outside global), PAT port overload, and static vs dynamic NAT use cases. Then practise related AZ-500 NAT questions on configuration and troubleshooting.
Secure compute, storage, and databases — This question tests Secure compute, storage, and databases — Static NAT maps one inside address to one outside address..
What is the correct answer to this question?
The correct answer is: Configure Azure SQL Database Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault and set key rotation policy to auto-renew every 90 days. — Option C is correct because Transparent Data Encryption (TDE) with customer-managed keys in Key Vault meets all requirements: encryption at rest, automatic rotation with Key Vault's key rotation policy, and access by Azure SQL Database without application direct access. Option A is wrong because Always Encrypted encrypts columns but requires the application to handle encryption keys. Option B is wrong because Azure Disk Encryption encrypts VM disks, not SQL database. Option D is wrong because server-side encryption with service-managed keys does not use customer-managed keys.
What should I do if I get this AZ-500 question wrong?
Review the four NAT address types (inside local, inside global, outside local, outside global), PAT port overload, and static vs dynamic NAT use cases. Then practise related AZ-500 NAT questions on configuration and troubleshooting.
What is the key concept behind this question?
Static NAT maps one inside address to one outside address.
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