Given:
- Compound interest for the second year = Rs. 420
- Compound interest rate = 5% per annum

To Find:
- Principal amount (P)

Solution:

Step 1: Understanding Compound Interest Formula
Compound interest is calculated using the formula:

A = P(1 + r/n)^(nt)

Where:
- A is the final amount
- P is the principal amount
- r is the interest rate (as a decimal)
- n is the number of times that interest is compounded per year
- t is the number of years

In this case, we are given the compound interest for the second year. To find the principal, we need to consider that the interest is compounded annually (n = 1) and the interest rate is 5% (r = 0.05).

Step 2: Calculating the Final Amount after 2 years
Let's assume the principal amount is P.

Using the compound interest formula, we can calculate the final amount after 2 years:

A = P(1 + r/n)^(nt)
A = P(1 + 0.05/1)^(1*2)
A = P(1 + 0.05)^2

Step 3: Calculating the Compound Interest for 2 years
The compound interest for 2 years can be calculated by subtracting the principal amount from the final amount:

Compound Interest = A - P

Step 4: Solving for the Principal Amount
Given that the compound interest for the second year is Rs. 420, we can set up the equation:

420 = A - P

Substituting the value of A from Step 2:

420 = P(1 + 0.05)^2 - P

420 = P(1.05)^2 - P

420 = 1.1025P - P

420 = 0.1025P

P = 420 / 0.1025

P ≈ 4102.44

Answer:
The principal amount is approximately Rs. 4102.44.

#Principal....Rs.8000...#RL..