UNDOCUMENTED MECHANICS
The number the game shows is targets, not arrows: min(level+4, 10), fixed at 10 targets from level 6 on. The arrow counts are two values it never displays: the table calls them "Minimum # of Missiles created" = min(level+3, 10) and "Maximum # of Missiles created" = 2 + level/4 (7 at level 20). The first is larger than the second at every level, so the two are not measuring the same thing.
The missile is destroyed on impact and hits only one thing, so it cannot keep chaining on the same monster.
The missile is allowed to pierce, but whether it does depends on the pierce chance on your gear; with none, it stops at the first target.