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percent means out of 100
→ 25% of 7/8 = 25/100 × 7/8 = (25×7)/(100×8) = 175/800 = (7×25)/(32×25) = 7/38
It would have been prudent to simplify the 25% before the multiplication:
25% of 7/8 = 25/100 × 7/8 = (1×25)/(4×25) × 7/8 = 1/4 × 7/8 = (1×7)/(4×8) = 7/32
But then again, it is expected that students should recognise 25% as ¼
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