Adding hotmail to Mac OS - Unable to verify account name or password

I was trying to add a Hotmail email to Mac OS email package and I kept getting the error ‘unable to verify username and password’. After lots of googling I discovered that to use Hotmail on a Mac desktop computer you need to use the Microsoft Exchange option and login there. On an iPhone you use the option at @Outlook.com however on a Mac desktop this option is not available so you are tempted to use the ‘other’ option. If you use that it will not work and you’ll get the error.

So I wanted to initially pose the question but discovered the solution after two hours googling I am providing the answer here as well. I hope that helps someone and saves them the time.