Hey, I came across this in the sample exam as well, and also in the Checkpoints question. I *think* I get it, so heres my explanation since no one else is answering.
Standard deviation of the sample is 1, therefore the standard deviation of the distribution of sample means (AKA standard error) is estimated to be 1/(25)^0.5 = 0.2.
This comes from SD_of_sample_means=s/(n)^0.5. You're trying to find the SD of the distribution of sample means, not the SD of the sample. From the central limit theorem, it is the distribution of sample means which is approximated to a normal distribution. It is with this distribution that we decide whether of not our sample mean is close enough to the expected sample mean (i.e. the alleged population mean) to accept or reject the null hypothesis.
Sam