A town had a population of 200,000 in 2010. If the annual growth rate is 2.5%, what will be the estimated population of the town in 2012?

Using the compound growth formula $P = P_0(1 + r)^n$: after year 1, population = $200,000 \times 1.025 = 205,000$; after year 2, population = $205,000 \times 1.025 = 210,125$. Option B (210,000) is the result of simple interest calculation ($200,000 \times 0.025 \times 2 = 10,000$), which ignores compounding, and options A and D are common arithmetic errors.