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Implementing and Operating Cisco Enterprise Network Core Technologies (ENCOR) · Cisco
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To facilitate the discovery of VNIs over the underlay Layer 3 network, virtual tunnel endpoints (VTEPs) are used. VTEPs are entities that originate or terminate VXLAN tunnels. They map Layer 2 and Layer 3 packets to the VNI to be used in the overlay network. Each VTEP has two interfaces: ■ Local LAN interfaces: These interfaces on the local LAN segment provide bridging between local hosts. ■ IP interface: This is a core-facing network interface for VXLAN. The IP interface’s IP address helps identify the VTEP in the network. It is also used for VXLAN traffic encapsulation and de-encapsulation. Source: CCNP and CCIE Enterprise Core: ENCOR 350-401 Official Cert Guide
VXLAN Tunnel Endpoint The VTEP device uses this IP address to encapsulate Ethernet frames and transmits the encapsulated packets to the transport network through the IP interface.
C is correct