EC2 pricing models (on-demand, reserved, spot) in AWS - Practice Problems & Coding Challenges

Challenge - 5 Problems

🧠 Conceptual

intermediate

Understanding EC2 On-Demand Pricing Behavior

Which statement best describes the behavior of EC2 On-Demand instances?

A You commit to a 1-year or 3-year term and pay upfront for a discounted hourly rate.

B You pay a fixed hourly rate regardless of usage duration, with no long-term commitment.

C You bid for unused capacity and your instance can be terminated anytime AWS needs the resources.

D You pay only when your instance is actively processing requests, with automatic scaling.

💡 Hint

Think about paying for flexibility without commitment.

On-Demand instances charge a fixed hourly rate with no upfront commitment, allowing you to start and stop anytime.

❓ Architecture

intermediate

Choosing EC2 Pricing Model for a Steady Workload

You have a steady, predictable workload running 24/7 for the next 3 years. Which EC2 pricing model is most cost-effective?

A Reserved instances with a 3-year term and upfront payment.

B On-Demand instances to maintain maximum flexibility.

C Spot instances to save costs by bidding on unused capacity.

D Dedicated hosts to isolate your instances physically.

💡 Hint

Consider long-term commitment discounts.

Reserved instances offer significant discounts for steady workloads with long-term commitments.

❓ service_behavior

advanced

Spot Instance Interruption Behavior

What happens when an EC2 Spot instance is interrupted by AWS?

A AWS sends a two-minute warning before terminating the instance.

B The instance is terminated immediately without any warning.

C The instance is stopped and can be restarted later without data loss.

D The instance is paused and resumes automatically when capacity is available.

💡 Hint

Think about how AWS notifies you before reclaiming Spot capacity.

AWS provides a two-minute warning before terminating Spot instances to allow graceful shutdown.

❓ security

advanced

Security Considerations for Spot Instances

Which security risk is most relevant when using EC2 Spot instances?

A Data loss due to sudden instance termination without warning.

B Unauthorized access because Spot instances share hardware with other customers.

C Potential exposure of sensitive data if instances are reused by other customers.

D Increased attack surface due to dynamic IP addresses on Spot instances.

💡 Hint

Consider how AWS manages hardware reuse for Spot instances.

AWS wipes storage between instance uses, but hardware reuse means you must encrypt sensitive data to prevent exposure.

✅ Best Practice

expert

Optimizing Cost with Mixed EC2 Pricing Models

You want to optimize costs for a web application with variable traffic: steady baseline load and occasional spikes. Which combination of EC2 pricing models is best?

A Use Dedicated hosts for baseline and Spot instances for spikes.

B Use On-Demand instances for baseline and Reserved instances for spikes.

C Use Spot instances for baseline and On-Demand instances for spikes.

D Use Reserved instances for baseline load and Spot instances for spikes.

💡 Hint

Think about balancing cost savings and availability.

Reserved instances cover steady load cost-effectively, while Spot instances handle spikes cheaply but with possible interruptions.

Practice

1. Which EC2 pricing model allows you to pay only for the compute time you use without any long-term commitment?

easy

A. Dedicated hosts

B. Reserved instances

C. Spot instances

D. On-demand instances

Solution

1. Step 1: Understand On-demand pricing

   On-demand instances let you pay per hour or second without any upfront commitment.

2. Step 2: Compare with other models

   Reserved requires commitment; Spot can be interrupted; Dedicated hosts are physical servers.

3. Final Answer:

   On-demand instances -> Option D

4. Quick Check:

   Pay-as-you-go = On-demand [OK]

Hint: No commitment means On-demand pricing [OK]

Common Mistakes:

• Confusing Reserved with On-demand
• Thinking Spot is always available
• Mixing Dedicated hosts with pricing models

2. Which of the following is the correct way to describe Spot instances in AWS EC2?

easy

A. Instances with a fixed monthly fee

B. Instances that use spare capacity and can be interrupted

C. Instances reserved for 3 years with upfront payment

D. Instances that run only on dedicated hardware

Solution

1. Step 1: Define Spot instances

   Spot instances use spare AWS capacity and are cheaper but can be stopped anytime.

2. Step 2: Eliminate other options

   Fixed monthly fee applies to Reserved; dedicated hardware is Dedicated hosts.

3. Final Answer:

   Instances that use spare capacity and can be interrupted -> Option B

4. Quick Check:

   Spot = spare capacity + interruption [OK]

Hint: Spot = cheap but can stop anytime [OK]

Common Mistakes:

• Thinking Spot has fixed fees
• Confusing Reserved with Spot
• Mixing Dedicated hosts with Spot

3. You launch an EC2 instance using Spot pricing. What happens if AWS needs the capacity back?

medium

A. Your instance is stopped or terminated with a 2-minute warning

B. You are charged the full On-demand price instead

C. Your instance continues running without interruption

D. Your instance is automatically converted to Reserved pricing

Solution

1. Step 1: Understand Spot instance interruptions

   AWS can reclaim Spot instances anytime, giving a 2-minute warning before stopping or terminating.

2. Step 2: Check other options

   Instances do not continue uninterrupted; no automatic price change or conversion to Reserved.

3. Final Answer:

   Your instance is stopped or terminated with a 2-minute warning -> Option A

4. Quick Check:

   Spot interruption = 2-minute warning stop [OK]

Hint: Spot instances get 2-minute stop warning [OK]

Common Mistakes:

• Assuming Spot instances never stop
• Thinking Spot switches to On-demand automatically
• Believing Spot instances run like Reserved

4. A user wants to save costs by committing to a 1-year usage but accidentally selects On-demand pricing. What is the main issue with this choice?

medium

A. On-demand pricing does not offer cost savings for long-term commitment

B. On-demand pricing requires upfront payment for 1 year

C. On-demand pricing instances cannot be launched immediately

D. On-demand pricing instances are always interrupted

Solution

1. Step 1: Understand On-demand pricing characteristics

   On-demand pricing charges per use with no upfront or commitment discounts.

2. Step 2: Identify the cost-saving option

   Reserved instances offer savings with 1 or 3 year commitments, unlike On-demand.

3. Final Answer:

   On-demand pricing does not offer cost savings for long-term commitment -> Option A

4. Quick Check:

   Commitment savings = Reserved, not On-demand [OK]

Hint: Commitment savings only with Reserved pricing [OK]

Common Mistakes:

• Thinking On-demand requires upfront payment
• Believing On-demand instances are delayed
• Confusing interruption with Spot pricing

5. A company runs a critical web application that must be available 24/7 with predictable costs. They also want to reduce expenses by committing to usage. Which EC2 pricing model should they choose and why?

hard

A. Spot instances, because they are cheapest and can be interrupted

B. On-demand instances, because they have no commitment and flexible pricing

C. Reserved instances, because they offer cost savings with a commitment and stable availability

D. Dedicated hosts, because they provide physical isolation

Solution

1. Step 1: Analyze availability and cost needs

   Critical 24/7 apps need stable availability and predictable costs.

2. Step 2: Match pricing models to needs

   Reserved instances provide cost savings with 1 or 3 year commitment and stable availability; Spot can be interrupted; On-demand is flexible but more costly.

3. Final Answer:

   Reserved instances, because they offer cost savings with a commitment and stable availability -> Option C

4. Quick Check:

   Critical + savings + commitment = Reserved [OK]

Hint: Stable + savings + commitment = Reserved instances [OK]

Common Mistakes:

• Choosing Spot for critical apps despite interruptions
• Picking On-demand for cost savings
• Confusing Dedicated hosts with pricing benefits