What is the right thing to do?

Your answers 1 and 2 are correct.

You must indicate because you are changing direction (turning right into the roundabout/curving to the right as instructed by the blue mandatory-direction sign). In Germany, whenever you turn off or follow a clearly directed turn like this, you signal to inform others.

The yellow car has to wait because you are on the priority road through the junction. The sign situation shows that your direction has right of way, so traffic coming from the side street (the yellow car) must yield and may only enter when it will not force you to brake or change course.

Rule of thumb for similar questions: First check who has priority via signs (they override “right before left”). Only if priority is unclear do you apply “right before left.” Then add signaling duties: if you turn, you signal.