If $x$ is 40% of $y$ and $y$ is 25% of $z$, then $x$ is what percent of $z$?

$x=0.40y$ and $y=0.25z$, so $x=0.40\times 0.25z=0.10z$ — that is, $x$ is 10% of $z$. (Adding the two percentages to get 65% treats them as if they were measured on the same base, but the 40% is taken on $y$ and the 25% on $z.$)