Solution:

Least Count (LC) = \(0.001 \text{cm}\). Main Scale Reading (MSR) = \(5 \text{mm} = 0.5 \text{cm}\). Circular Scale Reading (CSR) = \(25 \text{divisions}\). Observed Reading = MSR + (CSR \(\times\) LC) = \(0.5 \text{cm} + (25 \times 0.001 \text{cm}) = 0.525 \text{cm}\). Correct Reading = Observed Reading - Zero Error = \(0.525 \text{cm} - (-0.004 \text{cm}) = 0.525 \text{cm} + 0.004 \text{cm} = 0.529 \text{cm}\).