A trader marked the price of a commodity to include a profit of $25\%$ but allowed a discount of $16\%$ on the marked price. What will be his actual profit?

Let the Cost Price (CP) of the commodity be $100$.
The trader marks the price to include a $25\%$ profit:

$$\text{Marked Price (MP)}=100+25\%\text{ of }100=125$$

Now, a discount of $16\%$ is offered on this Marked Price:

$$\text{Discount}=16\%\text{ of }125=\frac{16}{100}\times 125=\frac{4}{25}\times 125=4\times 5=20$$

Calculate the Selling Price (SP):

$$\text{SP}=\text{MP}-\text{Discount}=125-20=105$$

The actual profit percentage is:

$$\text{Actual Profit}=\text{SP}-\text{CP}=105-100=5\%$$