Your instructor provided you with a function called challenge1.m. You have to use that function, then use the other code he gave you, such as
m = 256;
n = 256;
noise = 0.01;
[B, Ac, Ar, X] = challenge1(m, n, noise);
xNaive = Ac\B/Ar';
imagesc(X);
axis image;
colormap gray;
Actually there's not much for you to do since he gave you all the code you're supposed to run.
