Insert A "Drop Cap"

Inserting a Drop Cap is easy. Just select the letter you want to format as a "drop cap" and click on Format-->Drop Cap... in the Menu Bar, like so:

A dialog box opens up with 3 drop cap designs. Select the one you like. I've selected the middle one:

This is what it will look like without any further formatting:

You can adjust the font, how many lines to "drop" the cap, and how much distance from the text you want. I've only adjusted the distance to 0.3":