Frames of 1000 bits are sent over a 10^6 bps duplex link between two hosts.
When the data is transmitted using a duplex link, Round Trip Time (RTT) do not include the time taken by ACK frame to reach sender from the receiver. This is because the ACK frames are [piggybacked][1] with the data frames that are coming from the receiver for the sender (maybe a bit later).
Aforementioned, we must now calculate the number of frames transmitted during propagation time (rather than round trip time)
$No.\ of\ frames = 25*10^{-3}*10^{6} = 25$
Thus, we will need minimum of $5\ bits$ to represent sequence number distinctly.
HTH [1]: https://en.wikipedia.org/wiki/Piggybacking_(data_transmission)