Click on 'Insert,' again at the top of MS Word. When the menu appears, let your mouse arrow hover over 'Picture.' Here you'll have several options. You can create your letterhead on the fly using some of those options. However, for our purposes we'll opt to choose 'From File,' since we already have a ready graphic. Click on the option, 'From File,' and a dialogue box opens. Locate your graphic and then click on it and then click the 'Insert' button. Your graphic will then appear inside the dotted box.
When you're done, you can click on the 'Close' tab on the floating bar. The items in the header and footer will appear greyed out, but don't worry; this only means the they have been set. The cursor will then appear on the first line where you can begin typing your letter.