undefined function anchor()

If you must do it from code you can do it like below. But sv3tli0 is correct it should be done in your html.

Code:

$out = '<li>' . anchor($categories[$i]['link'], $categories[$i]['title']) . '</li>';

$data = array(
    'body' => $out,
);

You cannot place php code inside php code like that, that's why the error.

Yes you can.