The answer is Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault, because this feature encrypts the entire database at rest while allowing you to control the encryption keys through Azure Key Vault, ensuring compliance with security policies that demand customer-managed keys. TDE performs real-time I/O encryption and decryption of data files and log files, and when paired with customer-managed keys (CMK), it shifts key ownership from Microsoft to your organization, a critical requirement for many regulated industries. On the AZ-500 exam, this scenario tests your ability to distinguish TDE with CMK from Always Encrypted, which protects data in use and at rest but is not the correct feature for full database-level encryption with Key Vault integration. A common trap is confusing Always Encrypted for this use case, but remember: TDE is for the entire database at rest, while Always Encrypted is for column-level protection during queries. Memory tip: "TDE with CMK" = "Total Database Encryption with Customer-Managed Keys."
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.
A company plans to migrate on-premises SQL Server databases to Azure SQL Managed Instance. The security team requires that all data at rest be encrypted using customer-managed keys stored in Azure Key Vault. Which feature should be enabled?
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault
Transparent Data Encryption (TDE) with customer-managed keys (CMK) in Azure Key Vault is the feature for encrypting Azure SQL data at rest with customer-controlled keys. Option A is correct. Option B (Always Encrypted) encrypts data in use and at rest, but does not use Key Vault for TDE. Option C (Dynamic Data Masking) masks data to non-privileged users. Option D (Row-Level Security) restricts row access.
Key principle: Authentication proves identity; authorization controls what that identity can do after login. Both must work for full privileged access.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
✗
Row-Level Security
Why it's wrong here
Row-Level Security controls access to rows based on user characteristics, not encryption.
✗
Dynamic Data Masking
Why it's wrong here
Dynamic Data Masking hides data from non-privileged users but does not encrypt at rest.
✗
Always Encrypted with secure enclaves
Why it's wrong here
Always Encrypted encrypts sensitive data in transit and at rest, but does not use Key Vault for TDE.
✓
Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault
Why this is correct
TDE with CMK encrypts the database at rest using keys managed by the customer in Key Vault.
Related concept
Authentication checks who the user is.
Common exam traps
Common exam trap: authentication is not authorization
Logging in proves the user can authenticate. It does not automatically mean the user is allowed to enter privileged or configuration mode. Watch for AAA authorization, privilege level and command authorization details.
Detailed technical explanation
How to think about this question
This kind of question is testing the difference between identity and permission. A user may successfully log in to a router because authentication is working, but still fail to enter configuration mode because authorization is missing, misconfigured or mapped to a lower privilege level.
KKey Concepts to Remember
Authentication checks who the user is.
Authorization controls what the user is allowed to do after login.
Privilege levels affect access to EXEC and configuration commands.
AAA, TACACS+ and RADIUS can separate login success from command access.
TExam Day Tips
→Do not assume successful login means full administrative access.
→Look for words such as cannot enter configuration mode, privilege level, authorization or command access.
→Separate login problems from permission problems before choosing the answer.
Key takeaway
Authentication proves identity; authorization controls what that identity can do after login. Both must work for full privileged access.
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.
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 Cisco AAA concepts — authentication, authorization, and accounting. Study privilege levels (0–15), command authorization under TACACS+, and how RADIUS differs. Then practise related AZ-500 questions on access control and AAA configuration.
Secure compute, storage, and databases — This question tests Secure compute, storage, and databases — Authentication checks who the user is..
What is the correct answer to this question?
The correct answer is: Transparent Data Encryption (TDE) with customer-managed keys in Azure Key Vault — Transparent Data Encryption (TDE) with customer-managed keys (CMK) in Azure Key Vault is the feature for encrypting Azure SQL data at rest with customer-controlled keys. Option A is correct. Option B (Always Encrypted) encrypts data in use and at rest, but does not use Key Vault for TDE. Option C (Dynamic Data Masking) masks data to non-privileged users. Option D (Row-Level Security) restricts row access.
What should I do if I get this AZ-500 question wrong?
Review Cisco AAA concepts — authentication, authorization, and accounting. Study privilege levels (0–15), command authorization under TACACS+, and how RADIUS differs. Then practise related AZ-500 questions on access control and AAA configuration.
What is the key concept behind this question?
Authentication checks who the user is.
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Question Discussion
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