The rules for decimal arithmetic are derived from the principles of fraction arithmetic. A decimal number is simply a shorthand way of writing a fraction whose denominator is a power of 10 (e.g., 10, 100, 1000).
For example, 0.75 is equivalent to 75/100, and 1.2 is 1 and 2/10, or 12/10.
Addition Example (Fraction Form):
To add 0.5 + 0.25: In fractions, this is 5/10 + 25/100. To add them, we find a common denominator: 50/100 + 25/100 = 75/100, which is 0.75.
Multiplication Example (Fraction Form):
To multiply 0.5 × 0.5: In fractions, this is (5/10) × (5/10) = 25/100, which is 0.25. This demonstrates why the product has two decimal places.