As the title says. I even tried
SELECT CONVERT(NUMERIC, 1/2) which also returned 0.
I am using SQL Server 2008.
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First, you are executing the numbers as integers but second, you also have not defined the precision and scale of the numeric datatype.
SELECT CONVERT(NUMERIC(5, 2), 1.0/2.0)
SELECT CONVERT(NUMERIC(5, 2), 1/2.0)