Explanation:

- To find the difference between compound interest (CI) and simple interest (SI) over 2 years, we use the formula: Difference = \( \frac{P \times R^2}{100^2} \).

- Here, \( R = 5\% \) and the difference is Rs. 250.

- Substituting, we have: \( \frac{P \times 25}{10000} = 250 \).

- Simplifying gives \( P = 1,00,000 \).

- Option 1: Rs. 1,00,000

- Correct calculation shows P equals Rs. 1,00,000.

- Option 2: Rs. 80,000

- Does not satisfy the equation.

- Option 3: Rs. 40,000

- Does not satisfy the equation.

- Option 4: Rs. 1,20,000

- Does not satisfy the equation.

Therefore, the sum is Rs. 1,00,000.