Explanation:

Let's analyze the given situation:

- Cost Price (CP): The original price the shopkeeper pays for the article.

- Marked Price (MP): The price tagged on the article which is visible to the customer.

- Selling Price (SP) when discount given: Shopkeeper allows a 20% discount leading to a SP that gives him a 16% profit.

Let's assume:

- The cost price is \(100\).

- For a 16% profit, the SP needs to be \(116\).

Without discount:

- If MP provides 16% profit with a 20% discount, then MP should satisfy:

\((1 - 0.20) \times MP = 116\).

- Solving gives us MP = 145.

If article sold at MP:

- Profit = \((\text{MP} - \text{CP}) / \text{CP} \times 100\).

- Profit = \((145 - 100) / 100 \times 100 = 45\%\).

- Option 1: 45%

- Option 2: 35%

- Option 3: 36%

- Option 4: 55%

Therefore, the correct answer is option 1 with a profit of 45%.