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In this tutorial, learn how to create and add a watermark in Microsoft Word. Start with a new document, go to File, select New Document, then go to Design. Click on the Watermark button on the right to insert a watermark. You can choose to have no watermark, add a picture as a watermark, or add text as a watermark. To use an image, have it saved as a jpeg file. A helpful tip is to adjust the scale and uncheck washout for full opacity when printing on letterhead.