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In this video tutorial, viewers learn how to set up business letters in Microsoft Word. The first step involves adjusting the top margin from 1 inch to 2 inches. To do this, navigate to the Page Layout tab, click on Margins, and select Custom Margins, then enter "2" in the top margin field before pressing OK. This will change the cursor position accordingly. Next, the tutorial emphasizes the importance of changing font style, size, and spacing options to ensure the letter is presented professionally. The video guides users through these essential formatting adjustments for creating effective business letters.