Well, the radius is half of the diameter. In this case, half of 3 1/2''. Half of three (3 ÷ 2) is 1.5. Half of a half is a quarter. Think of it like this, when you have half of a dollar (Two quarters for this scenario) and you split it in half, you have one quarter of a dollar left. So, you half 1.5 1/4.
