Final answer:
Managua is the capital and largest city of Nicaragua, located by Lake Managua with notable sites like Plaza de la Revolucion and the Old St. James Cathedral. It became the capital after Leon and Granada, and features Tiscapa Lagoon and Asososca Lagoon within the city.
Step-by-step explanation:
The capital and largest city of Nicaragua is Managua. Situated on the shores of Lake Managua, this city has a rich history with several significant landmarks such as the Plaza de la Revolucion and the Old St. James Cathedral. While Leon and Granada were the previous capitals of Nicaragua, Managua has been the primary city since it attained the status of the capital. It is also famed for natural water bodies within its confines, including Tiscapa Lagoon and Asososca Lagoon. Managua, being the hub of Nicaraguan culture and governance, reflects the country's diverse population and traditions stemming from indigenous, European, African, and other cultural influences.