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In this video tutorial, the presenter demonstrates how to create a modified block business letter using open punctuation. Open punctuation means omitting the colon after the salutation and the comma after the complimentary close, unlike mixed punctuation, which includes both. To format the letter in modified block style, set a tab at 3.25 inches on the ruler, which is the midpoint for a 6.5-inch typing line. The date and closing lines should also align with this midpoint. The video outlines the process of setting this up either at the beginning with a blank document or after typing the letter, highlighting the correct formatting and spacing needed.