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In this tutorial, Ella Lima demonstrates how to insert a letterhead in MS Word. First, navigate to the Insert tab and click on "Picture" to browse for the letterhead on your hard drive. Once selected, click the "Insert" button to place the letterhead in the document. If the letterhead does not fit the borders, right-click on the picture, then choose "Size and Position." Set both height and width to 100%. Next, go to the Text Wrapping tab and select the "Behind text" option. Finally, adjust the position settings for horizontal alignment to center it relative to the page, ensuring that it is properly positioned vertically as well.