Modelsim simulation in Quartus II

I am trying to simulate using Modelsim in Altera Lite environment. I entered in the Tools directory the location of the Modelsim executable, which also has the file "student_license_dat", a valid license that Modelsim provided me. However when I try to simulate with it, I get a long message that LM_LICENSE_FILE or MGLS_LICENSE_FILE is not pointing to the correct license file. I could not find this file anywhere in the directory where Altera Lite is stored. Where do I add the tile.

the log file is empty and does not give any helpful hint either. Can someone help?