Is this the correct way to resolve a missed Ice Knife?

Question

Ice Knife:

Make a ranged spell attack against the target. On a hit, the target takes 1d10 piercing damage. Hit or miss, the shard then explodes. The target and each creature within 5 feet of the point where the ice exploded must succeed on a Dexterity saving throw or take 2d6 cold damage.

I read this as: where ever the knife lands the original target must roll a saving throw, plus any other creatures caught in the blast radius of 5ft.

Going forward with that I ruled if Ice Knife missed it must land and explode within 5ft of the original target.

Is this correct?

I've also homeruled -with a 5ft grid-: There are total of 4 squares that the ice knife can land: directly behind the target, two adjacent squares (left&right) of that and same square as the target. And roll 1d4 to decide which one it is every time the spell is missed.

Answer 1

The target and each creature within 5 feet of it...

Ice Knife:

You create a shard of ice and fling it at one creature within range. Make a ranged spell attack against the target. On a hit, the target takes 1d10 piercing damage. Hit or miss, the shard then explodes. The target and each creature within 5 feet of it must succeed on a Dexterity saving throw or take 2d6 cold damage.

I'm not sure where the "within 5 feet of the point where the ice exploded" comes from. The spell description I have clearly states that the target is the focal point of the cold damage (hit or miss). And, what creatures are within 5 feet of the target? Any within a 5-foot attack range.

Most creatures have a 5-foot reach and can thus attack targets within 5 feet of them when making a melee attack.

If you can hit (or be hit by) a creature with an attack that has a 5-foot range then that creature is within 5 feet of the target and must save against Ice Knife's cold damage. If creatures in all eight surrounding squares are within melee range, then creatures in all eight squares are affected. If the DM says diagonal squares are out of melee range, then just creatures in the adjacent squares are affected. And don't forget up if there's a creature within range above the target.

Answer 2

The description of the Ice Knife spell was changed in the errata for Princes of the Apocalypse (where the spell first appeared) and updated in the revised Elemental Evil Player's Companion to clarify the targeted area more clearly.

The updated description of Ice Knife reads (emphasis mine):

Hit or miss, the shard then explodes. The target and each creature within 5 feet of it must succeed on a Dexterity saving throw or take 2d6 cold damage.

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Previously, the spell didn't say anything about the shard exploding anywhere other than the target's space. 'The point where the shard exploded' came from this rule for adjudicating areas of effect on a grid (DMG, p. 251):

Choose an intersection of squares or hexes as the point of origin of an area of effect, then follow its rules as normal. If an area of effect is circular and covers at least half a square, it affects that square.

That meant that, hit or miss, the caster would choose (or randomly pick) a corner of the target's space, and that's where the explosion would happen, with a radius of 5 feet, targeting the 4 squares touching that intersection.

Basically, pre-errata, the explosion of the Ice Knife was a 2x2 square (on a 5-foot grid battlemap) which had to include the original target in one of the squares. And the caster would choose the point of origin.

However, as of the errata, the target and all creatures within 5 feet of it (i.e. within 1 square of it, on a 5-foot grid) must make the Dexterity saving throw. The revised wording is much clearer.

Answer 3

It covers a 3x3 area, regardless of whether it hits or misses

I've always understood this to mean that the ice shard explodes more or less in the middle of the 5x5 square if the initial ranged attack hits the target (since creatures do not physically take up the space they control, a medium creature is not actually 5 foot wide, etc), and thus all 8 squares around it are affected.

Using the quote from your self-answer:

Choose an intersection of squares or hexes as the point of origin of an area of effect, then follow its rules as normal. If an area of effect is circular and covers at least half a square, it affects that square. (DMG p.251)

This means that if the ice shard explodes in the middle, then each of the surrounding 8 squares are partially covered, since they are all within 5ft of any point of the 5x5 "target square", by about 50%.

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The spell description has received errata (and the EEPC was updated accordingly - original EEPC, updated EEPC; thanks @V2Blast) that states the following:

The target and each creature within 5 feet of it must succeed on a Dexterity saving throw or take 2d6 cold damage.

This shows that the intention was to cover a 3x3 area, since you don't target corners of a grid, even with the variant rule; you target a creature, and it either hits or doesn't, then the secondary affect kicks in as written. Since the grid is an abstraction, for a spell to target the edge or corner of a 5x5 square such that some of the 8 surrounding squares aren't affected seems to be reducing the intended effect of the spell.