Step 1: Use the pressure relation for an open tube manometer.
Pressure difference is
\[
\Delta P=\rho gh.
\]
Here,
\[
\Delta P=P_{\text{atm}}
=100\,\text{kPa}
=10^5\,\text{Pa},
\]
and
\[
h=125\,\text{cm}=1.25\,\text{m}.
\]
Step 2: Calculate the density.
\[
\rho
=
\frac{\Delta P}{gh}
=
\frac{10^5}{10\times1.25}
=
8000\,\mathrm{kg\,m^{-3}}.
\]
Thus,
\[
\boxed{\rho=8\times10^{3}\,\mathrm{kg\,m^{-3}}.}
\]
Hence,
\[
\boxed{(D)}
\]
is the correct answer.