Step 1: Balance the magnetic force with the weight of the wire.
The magnetic force per unit length between two parallel conductors is
\[
\frac{F}{L}
=
\frac{\mu_0 I_1 I_2}{2\pi d}.
\]
For equilibrium,
\[
\frac{\mu_0 I_1 I_2}{2\pi d}
=
\lambda g,
\]
where
\[
I_1=120\,\mathrm{A},
\]
\[
\lambda=1.2\times10^{-2}\,\mathrm{kg\,m^{-1}},
\]
\[
d=2.5\times10^{-2}\,\mathrm{m}.
\]
Step 2: Substitute the values.
Using
\[
\mu_0=4\pi\times10^{-7}\,\mathrm{H\,m^{-1}},
\]
\[
\frac{2\times10^{-7}\times120\times I}{2.5\times10^{-2}}
=
1.2\times10^{-2}\times10.
\]
Simplifying,
\[
9.6\times10^{-4}I
=
0.12,
\]
\[
I
=
125\,\mathrm{A}.
\]
Hence,
\[
\boxed{125\,\mathrm{A}}
\]
Therefore,
\[
\boxed{(D)}
\]
is the correct answer.