A trader marked the price of his commodity so as to include a profit of 25 percent. He allowed a discount of 16 percent on the marked price. What is the actual profit he earns?

A9%

B5% ✓ Correct

C16%

D20%

Correct answer: (B) 5%

Explanation

The actual profit is 5%.

The marked price includes 25% profit, so MP = 1.25 x CP.

A 16% discount gives SP = MP x 0.84 = 1.25 x 0.84 x CP.

SP = 1.05 x CP.

The profit is 5% of the cost price.

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