It doesn't "drop" to start with, but it will shoot LOW at VERY close range. The arrow needs time to climb to the level of the sights
with a 400 grain arrow going at 250 fps, you should get something like this (depending on how high your sights/peer are , this can change)
1 Yard 4" low
2 3.25 low
3 1.93 low
4 1.35 low
5 .83 low
6 .37 low
7 .04" high
So at 5 yards, your less than 1" low not a HUGE problem
Also, remember that when shooting DOWN, (or up for that matter...anything but level) your trajectory flattens out....but at this range, it would be minimal.
Your buddy is RIGHT to say aim high....but not more than 1" high at 5 yards. (depending on arrow speed/weight/and how high your peep/sights are)