Whether they get the question exactly right and can pinpoint the specific compiler passes or algebraic properties responsible for reductions like this is totally irrelevant and not what you’re actually looking for or asking about. It’s a very good jumping point for a conversation about optimization and testing whether they’re the type of developer who has ever looked at the assembly produced in their hotpath or not.
Anyone who dumbly suggests that loops in source code will always result in loops in assembly doesn’t have a clue. Anyone who throws their hands up and says, “I have no idea, but I wonder if there’s some loop invariant or algebraic trick that can be used to optimize this, let’s think about it out loud for a bit” has taken a compiler class and gets full marks. Anyone who says, “I dunno, let’s see what godbolt does and look through the llvm-opt pane” gets an explicit, “hire this one” in the feedback to the hiring manager.
It’s less about what they know and more about if they can find out.
So in other words, it isn't "basic and essential optimizations" that you would expect even a junior engineer to know (as your comment implies), but a mechanism to trigger a conversation to see how they think about problems. In fact, it sounds like something you wouldn't expect them to know.