Based on the exhibits, Switch-1 has a trunk port on 1/1/1 that allows VLANs 10 and 20. Switch-2 has an access port on 1/1/2 that belongs to VLAN 10. Switch-3 has an access port on 1/1/3 that belongs to VLAN 20. If a broadcast arrives with a VLAN 10 tag on 1/1/1 on Switch-1, Switch-1 does not drop the frame. Instead, Switch-1 forwards the frame to all ports that belong to VLAN 10, which includes the trunk port 1/1/2 and the access port 1/1/4. Switch-2 receives the frame on its access port 1/1/2 and forwards it to all ports in VLAN 10, which includes the access port 1/1/5. Switch-3 does not receive the frame because it is not in VLAN 10. Therefore, this is not how the switch handles the traffic, and the correct answer is no.

On Switch-1, set 192.168.1.3 as a peer IP address in the VNI 5020 context is part of the process for setting up VXLAN to meet the requirements of enabling servers to be part of the same VXLANs and VNIs as shown in the exhibit. Switch-1, Switch-2, and Switch-3 are ArubaOS-CX switches that use VXLAN to provide Layer 2 extension over Layer 3 networks without EVPN.
VXLAN is a feature that uses UDP encapsulation to tunnel Layer 2 frames over Layer 3 networks using VNIs. To set up VXLAN without EVPN on Switch-1, you need to do the following steps:
Configure loopback interfaces with IP addresses on each switch
Configure VLAN interfaces with IP addresses on each switch
Configure VXLAN interfaces with VNIs on each switch
Configure peer IP addresses for each VNI on each switch
Configure static routes or dynamic routing protocols to enable reachability between loopback interfaces On Switch-1, setting 192.168.1.3 as a peer IP address in the VNI 5020 context means that Switch-1 can send and receive VXLAN traffic for VNI 5020 to and from Switch-2, which has the loopback interface with IP address 192.168.1.3.

A frame with destination MAC address, 00:50:56:15:16:28, arrives with a VLAN 10 tag on 1/1/1 on Switch-1. Switch-1 encapsulates the frame with VXLAN and an IP header destined to 192.168.1.2 is a correct explanation of how the switch handles the traffic. Switch-1, Switch-2, and Switch-3 are ArubaOS-CX switches that use VXLAN and EVPN to provide Layer 2 extension over Layer 3 networks. VXLAN is a feature that uses UDP encapsulation to tunnel Layer 2 frames over Layer 3 networks using VNIs. EVPN is a feature that uses BGP to advertise MAC and IP addresses of hosts connected to VTEPs. Switch-1 receives a frame with destination MAC address, 00:50:56:15:16:28, which belongs to VM-2 on Switch-3. Switch-1 learns from EVPN that VM-2 is reachable through VTEP 192.168.1.2, which is Switch-3's loopback interface. Switch-1 encapsulates the frame with VXLAN and an IP header destined to 192.168.1.2 and sends it over the underlay network1.