--=====================================================================================================================
--      This is the original test data including the second account you added this evening
--=====================================================================================================================
IF OBJECT_ID('TempDB..#InterestRates','U') IS NOT NULL 
DROP TABLE #InterestRates
;
CREATE TABLE #InterestRates
(
[InterestRate] DECIMAL(28,17) NULL,
[Month] [int] NULL,
[year] [int] NULL
)
;
INSERT INTO #InterestRates
(InterestRate,[Month],[Year])
SELECT '0.105','8','2007' UNION ALL
SELECT '0.105','9','2007' UNION ALL
SELECT '0.105','10','2007' UNION ALL
SELECT '0.105','11','2007' UNION ALL
SELECT '0.105','12','2007' UNION ALL
SELECT '0.105','1','2008' UNION ALL
SELECT '0.105','2','2008' UNION ALL
SELECT '0.105','3','2008' UNION ALL
SELECT '0.105','4','2008' UNION ALL
SELECT '0.105','5','2008' UNION ALL
SELECT '0.105','6','2008' UNION ALL
SELECT '0.105','7','2008' UNION ALL
SELECT '0.105','8','2008' UNION ALL
SELECT '0.105','9','2008' UNION ALL
SELECT '0.105','10','2008' UNION ALL
SELECT '0.105','11','2008' UNION ALL
SELECT '0.105','12','2008' UNION ALL
SELECT '0.105','1','2009' UNION ALL
SELECT '0.105','2','2009' UNION ALL
SELECT '0.105','3','2009' UNION ALL
SELECT '0.105','4','2009' UNION ALL
SELECT '0.105','5','2009' UNION ALL
SELECT '0.105','6','2009' UNION ALL
SELECT '0.0067','7','2009' UNION ALL
SELECT '0.0067','8','2009' UNION ALL
SELECT '0.0067','9','2009' UNION ALL
SELECT '0.0055','10','2009' UNION ALL
SELECT '0.0055','11','2009' UNION ALL
SELECT '0.0055','12','2009' UNION ALL
SELECT '0.0055','1','2010' UNION ALL
SELECT '0.0055','2','2010' 
;
IF OBJECT_ID('TempDB..#Refunds','U') IS NOT NULL 
DROP TABLE #Refunds
;
CREATE TABLE #Refunds
(
[Acct_no] varchar(20) NULL,
[Amount] DECIMAL(28,17) NULL,
[Month] [int] NULL,
[year] [int] NULL
)
;
INSERT INTO #Refunds
(Acct_no,Amount, [Month],[year])
SELECT '1271003600','333.107456586203','1','2008' UNION ALL
SELECT '1271003600','87.6816131178288','1','2009' UNION ALL
SELECT '1271003600','103.602002310821','2','2008' UNION ALL
SELECT '1271003600','81.9722910242125','2','2009' UNION ALL
SELECT '1271003600','72.3401647559977','3','2008' UNION ALL
SELECT '1271003600','86.1625895742832','3','2009' UNION ALL
SELECT '1271003600','103.361218989159','4','2008' UNION ALL
SELECT '1271003600','84.6065155612006','4','2009' UNION ALL
SELECT '1271003600','92.2834655375568','5','2008' UNION ALL
SELECT '1271003600','84.6688365382596','5','2009' UNION ALL
SELECT '1271003600','89.0687598341003','6','2008' UNION ALL
SELECT '1271003600','79.1241550533365','6','2009' UNION ALL
SELECT '1271003600','123.131877952709','7','2008' UNION ALL
SELECT '1271003600','89.3938505146093','7','2009' UNION ALL
SELECT '1271003600','87.2510378856992','8','2007' UNION ALL
SELECT '1271003600','94.0687846832911','8','2008' UNION ALL
SELECT '1271003600','340.381691069552','8','2009' UNION ALL
SELECT '1271003600','80.3632310400272','9','2007' UNION ALL
SELECT '1271003600','121.96840107118','9','2008' UNION ALL
SELECT '1271003600','87.1037670414245','10','2007' UNION ALL
SELECT '1271003600','94.9861134399298','10','2008' UNION ALL
SELECT '1271003600','73.8008470324637','11','2007' UNION ALL
SELECT '1271003600','78.537373182859','11','2008' UNION ALL
SELECT '1271003600','90.7988754111144','12','2007' UNION ALL
SELECT '1271003600','88.4954811818565','12','2008' UNION ALL
SELECT '1271005700 ','651.764','1','2008' UNION ALL
SELECT '1271005700 ','650.766','1','2009' UNION ALL
SELECT '1271005700 ','897.994','2','2008' UNION ALL
SELECT '1271005700 ','688.486','2','2009' UNION ALL
SELECT '1271005700 ','721.466','3','2008' UNION ALL
SELECT '1271005700 ','718.654','3','2009' UNION ALL
SELECT '1271005700 ','913.072','4','2008' UNION ALL
SELECT '1271005700 ','863.224','4','2009' UNION ALL
SELECT '1271005700 ','735.081','5','2008' UNION ALL
SELECT '1271005700 ','647.368','5','2009' UNION ALL
SELECT '1271005700 ','607.721','6','2008' UNION ALL
SELECT '1271005700 ','580.359','6','2009' UNION ALL
SELECT '1271005700 ','718.969','7','2008' UNION ALL
SELECT '1271005700 ','693.378','7','2009' UNION ALL
SELECT '1271005700 ','734.005','8','2007' UNION ALL
SELECT '1271005700 ','591.788','8','2008' UNION ALL
SELECT '1271005700 ','679.773','8','2009' UNION ALL
SELECT '1271005700 ','560.296','9','2007' UNION ALL
SELECT '1271005700 ','685.047','9','2008' UNION ALL
SELECT '1271005700 ','682.834','10','2007' UNION ALL
SELECT '1271005700 ','608.706','10','2008' UNION ALL
SELECT '1271005700 ','586.172','11','2007' UNION ALL
SELECT '1271005700 ','650.191','11','2008' UNION ALL
SELECT '1271005700 ','858.672','12','2007' UNION ALL
SELECT '1271005700 ','711.708','12','2008' 
;
--=====================================================================================================================
--      Solution to the problem starts here
--=====================================================================================================================

--===== Conditionally drop the work table to make reruns for any troubleshooting easier.
     IF OBJECT_ID('TempDB..#Work','U') IS NOT NULL
        DROP TABLE #Work
;
--===== Declare local variables to support the upcoming running total update
DECLARE @PrevAcct VARCHAR(20),
        @PrevBal  DECIMAL(28,17),
        @IntAmt   DECIMAL(28,17)
;
--===== This set of cascading CTE's preconditions the data for processing and later display
WITH
cteAccount AS
( --=== Find all distinct account numbers so we can apply to all dates for rates without dupes
 SELECT DISTINCT Acct_No 
   FROM #Refunds
),
cteRate AS
( --=== Apply the account number to all date rates without dupes
 SELECT acct.Acct_No,
        rate.[Year],
        rate.[Month],
        rate.InterestRate/12 AS MonthRate
   FROM #InterestRates rate
  CROSS JOIN cteAccount acct
)
 SELECT ISNULL(rate.Acct_No,'') AS Acct_No,
        ISNULL(DATEADD(mm,rate.[Month],DATEADD(yy,rate.[YEAR]-1900,0)),0) AS MonthDate,
        rate.MonthRate,
        ISNULL(amt.Amount,0) AS Amount,
        CAST(NULL AS DECIMAL(28,17)) AS InterestAmount,
        CAST(NULL AS DECIMAL(28,17)) AS Balance
   INTO #Work
   FROM cteRate rate
   LEFT JOIN #Refunds amt
     ON rate.Acct_No = amt.Acct_No
    AND rate.[Year]    = amt.[Year]
    AND rate.[Month]   = amt.[Month]
;
--===== Add the required clustered index
  ALTER TABLE #Work
    ADD PRIMARY KEY CLUSTERED (Acct_No, MonthDate) WITH FILLFACTOR = 100
;
--===== Do the update to calculate the interest amounts and the running total balance.
     -- This will do a million rows in about 3 to 7 seconds
 UPDATE #Work
    SET @IntAmt = InterestAmount = CASE
                                   WHEN @PrevAcct = Acct_No
                                   THEN (@PrevBal + Amount) * Monthrate
                                   ELSE (Amount) * MonthRate
                                   END,
        @PrevBal = Balance       = CASE
                                   WHEN @PrevAcct = Acct_No
                                   THEN @PrevBal + Amount + @IntAmt
                                   ELSE Amount + @IntAmt
                                   END,
        @PrevAcct                = Acct_No
   FROM #Work WITH(TABLOCKX) --Not required on a temp table, but good habit for this type of update.
 OPTION (MAXDOP 1)           --Absolutely essential whether you use a temp table or not.
;

 SELECT Acct_No, RIGHT(CONVERT(CHAR(11),MonthDate,113),8) AS [Month], Amount, InterestAmount, Balance
   FROM #Work
  ORDER BY Acct_No, MonthDate
;

-- A work table to hold the reformatted data, and
-- ultimately, the results
CREATE  TABLE #Work
    (
    Acct_No         VARCHAR(20) NOT NULL,
    MonthDate       DATETIME NOT NULL,
    MonthRate       DECIMAL(19,12) NOT NULL,
    Amount          DECIMAL(19,12) NOT NULL,
    InterestAmount  DECIMAL(19,12) NOT NULL,
    RunningTotal    DECIMAL(19,12) NOT NULL,
    RowRank         BIGINT NOT NULL
    );

-- Slightly modified from Jeff's example, to prepare
-- for the set-based iteration method
WITH    Accounts
AS      (
        -- Get a list of the account numbers
        SELECT  DISTINCT Acct_No 
        FROM    #Refunds
        ),
        Rates
AS      (
        -- Apply all the accounts to all the rates
        SELECT  A.Acct_No,
                R.[Year],
                R.[Month],
                MonthRate = R.InterestRate / 12
        FROM    #InterestRates R
        CROSS 
        JOIN    Accounts A
        ),
        BaseData
AS      (
        -- The basic data we need to work with
        SELECT  Acct_No = ISNULL(R.Acct_No,''),
                MonthDate = ISNULL(DATEADD(MONTH, R.[Month], DATEADD(YEAR, R.[year] - 1900, 0)), 0),
                R.MonthRate,
                Amount = ISNULL(RF.Amount,0),
                InterestAmount = ISNULL(RF.Amount,0) * R.MonthRate,
                RunningTotal = ISNULL(RF.Amount,0)
        FROM    Rates R
        LEFT
        JOIN    #Refunds RF
                ON  RF.Acct_No = R.Acct_No
                AND RF.[Year] = R.[Year]
                AND RF.[Month] = R.[Month]
        )
-- Basic data plus a rank id, numbering the rows by MonthDate, and resetting to 1 for each new Account
INSERT  #Work
        (Acct_No, MonthDate, MonthRate, Amount, InterestAmount, RunningTotal, RowRank)
SELECT  BD.Acct_No, BD.MonthDate, BD.MonthRate, BD.Amount, BD.InterestAmount, BD.RunningTotal,
        RowRank = RANK() OVER (PARTITION BY BD.Acct_No ORDER BY MonthDate)
FROM    BaseData BD;

-- An index to speed the next stage (different from that used with the Quirky Update method)
CREATE UNIQUE CLUSTERED INDEX nc1 ON #Work (RowRank, Acct_No);

-- Iteration variables
DECLARE @Rank       BIGINT,
        @RowCount   INTEGER;

-- Initialize
SELECT  @Rank = 1,
        @RowCount = 1;

-- This is the iteration bit, processes a rank id per iteration
-- The number of rows processed with each iteration is equal to the number of groups in the data
-- More groups --> greater efficiency
WHILE   (1 = 1)
BEGIN
        SET @Rank = @Rank + 1;
        
        -- Set-based update with running totals for the current rank id
        UPDATE  This
        SET     InterestAmount = (Previous.RunningTotal + This.Amount) * This.MonthRate,
                RunningTotal = Previous.RunningTotal + This.Amount + (Previous.RunningTotal + This.Amount) * This.MonthRate
        FROM    #Work This
        JOIN    #Work Previous
                ON  Previous.Acct_No = This.Acct_No
                AND Previous.RowRank = @Rank - 1
        WHERE   This.RowRank = @Rank;
        
        IF  (@@ROWCOUNT = 0) BREAK;
END;

-- Show the results in natural order
SELECT  *
FROM    #Work
ORDER   BY
        Acct_No, RowRank;

--=====================================================================================================================
--      This is the original test data including the second account you added this evening
--=====================================================================================================================
SET NOCOUNT ON

IF OBJECT_ID('TempDB..#InterestRates','U') IS NOT NULL 
DROP TABLE #InterestRates
;
CREATE TABLE #InterestRates
(
[InterestRate] DECIMAL(28,17) NULL,
[Month] [int] NULL,
[year] [int] NULL
)
;
INSERT INTO #InterestRates
(InterestRate,[Month],[Year])
SELECT '0.105','8','2007' UNION ALL
SELECT '0.105','9','2007' UNION ALL
SELECT '0.105','10','2007' UNION ALL
SELECT '0.105','11','2007' UNION ALL
SELECT '0.105','12','2007' UNION ALL
SELECT '0.105','1','2008' UNION ALL
SELECT '0.105','2','2008' UNION ALL
SELECT '0.105','3','2008' UNION ALL
SELECT '0.105','4','2008' UNION ALL
SELECT '0.105','5','2008' UNION ALL
SELECT '0.105','6','2008' UNION ALL
SELECT '0.105','7','2008' UNION ALL
SELECT '0.105','8','2008' UNION ALL
SELECT '0.105','9','2008' UNION ALL
SELECT '0.105','10','2008' UNION ALL
SELECT '0.105','11','2008' UNION ALL
SELECT '0.105','12','2008' UNION ALL
SELECT '0.105','1','2009' UNION ALL
SELECT '0.105','2','2009' UNION ALL
SELECT '0.105','3','2009' UNION ALL
SELECT '0.105','4','2009' UNION ALL
SELECT '0.105','5','2009' UNION ALL
SELECT '0.105','6','2009' UNION ALL
SELECT '0.0067','7','2009' UNION ALL
SELECT '0.0067','8','2009' UNION ALL
SELECT '0.0067','9','2009' UNION ALL
SELECT '0.0055','10','2009' UNION ALL
SELECT '0.0055','11','2009' UNION ALL
SELECT '0.0055','12','2009' UNION ALL
SELECT '0.0055','1','2010' UNION ALL
SELECT '0.0055','2','2010' 
;
IF OBJECT_ID('TempDB..#Refunds','U') IS NOT NULL 
DROP TABLE #Refunds
;
CREATE TABLE #Refunds
(
[Acct_no] varchar(20) NULL,
[Amount] DECIMAL(28,17) NULL,
[Month] [int] NULL,
[year] [int] NULL
)
;
INSERT INTO #Refunds
(Acct_no,Amount, [Month],[year])
SELECT '1271003600','333.107456586203','1','2008' UNION ALL
SELECT '1271003600','87.6816131178288','1','2009' UNION ALL
SELECT '1271003600','103.602002310821','2','2008' UNION ALL
SELECT '1271003600','81.9722910242125','2','2009' UNION ALL
SELECT '1271003600','72.3401647559977','3','2008' UNION ALL
SELECT '1271003600','86.1625895742832','3','2009' UNION ALL
SELECT '1271003600','103.361218989159','4','2008' UNION ALL
SELECT '1271003600','84.6065155612006','4','2009' UNION ALL
SELECT '1271003600','92.2834655375568','5','2008' UNION ALL
SELECT '1271003600','84.6688365382596','5','2009' UNION ALL
SELECT '1271003600','89.0687598341003','6','2008' UNION ALL
SELECT '1271003600','79.1241550533365','6','2009' UNION ALL
SELECT '1271003600','123.131877952709','7','2008' UNION ALL
SELECT '1271003600','89.3938505146093','7','2009' UNION ALL
SELECT '1271003600','87.2510378856992','8','2007' UNION ALL
SELECT '1271003600','94.0687846832911','8','2008' UNION ALL
SELECT '1271003600','340.381691069552','8','2009' UNION ALL
SELECT '1271003600','80.3632310400272','9','2007' UNION ALL
SELECT '1271003600','121.96840107118','9','2008' UNION ALL
SELECT '1271003600','87.1037670414245','10','2007' UNION ALL
SELECT '1271003600','94.9861134399298','10','2008' UNION ALL
SELECT '1271003600','73.8008470324637','11','2007' UNION ALL
SELECT '1271003600','78.537373182859','11','2008' UNION ALL
SELECT '1271003600','90.7988754111144','12','2007' UNION ALL
SELECT '1271003600','88.4954811818565','12','2008' UNION ALL
SELECT '1271005700 ','651.764','1','2008' UNION ALL
SELECT '1271005700 ','650.766','1','2009' UNION ALL
SELECT '1271005700 ','897.994','2','2008' UNION ALL
SELECT '1271005700 ','688.486','2','2009' UNION ALL
SELECT '1271005700 ','721.466','3','2008' UNION ALL
SELECT '1271005700 ','718.654','3','2009' UNION ALL
SELECT '1271005700 ','913.072','4','2008' UNION ALL
SELECT '1271005700 ','863.224','4','2009' UNION ALL
SELECT '1271005700 ','735.081','5','2008' UNION ALL
SELECT '1271005700 ','647.368','5','2009' UNION ALL
SELECT '1271005700 ','607.721','6','2008' UNION ALL
SELECT '1271005700 ','580.359','6','2009' UNION ALL
SELECT '1271005700 ','718.969','7','2008' UNION ALL
SELECT '1271005700 ','693.378','7','2009' UNION ALL
SELECT '1271005700 ','734.005','8','2007' UNION ALL
SELECT '1271005700 ','591.788','8','2008' UNION ALL
SELECT '1271005700 ','679.773','8','2009' UNION ALL
SELECT '1271005700 ','560.296','9','2007' UNION ALL
SELECT '1271005700 ','685.047','9','2008' UNION ALL
SELECT '1271005700 ','682.834','10','2007' UNION ALL
SELECT '1271005700 ','608.706','10','2008' UNION ALL
SELECT '1271005700 ','586.172','11','2007' UNION ALL
SELECT '1271005700 ','650.191','11','2008' UNION ALL
SELECT '1271005700 ','858.672','12','2007' UNION ALL
SELECT '1271005700 ','711.708','12','2008' 
;
--=====================================================================================================================
--      Solution to the problem starts here
--=====================================================================================================================

--===== Conditionally drop the work table to make reruns for any troubleshooting easier.
	IF OBJECT_ID('TempDB..#Work','U') IS NOT NULL
        DROP TABLE #Work;
        
        
--===== This set of cascading CTE's preconditions the data for processing and later display
WITH
cteAccount AS
( --=== Find all distinct account numbers so we can apply to all dates for rates without dupes
 SELECT DISTINCT Acct_No 
   FROM #Refunds
),
cteRate AS
( --=== Apply the account number to all date rates without dupes
 SELECT acct.Acct_No,
        rate.[Year],
        rate.[Month],
        rate.InterestRate/12 AS MonthRate
   FROM #InterestRates rate
  CROSS JOIN cteAccount acct
)
 SELECT ExecSeq = ISNULL(CAST(0 AS INT), 0),
		ISNULL(rate.Acct_No,'') AS Acct_No,
        ISNULL(DATEADD(mm,rate.[Month],DATEADD(yy,rate.[YEAR]-1900,0)),0) AS MonthDate,
        rate.MonthRate,
        ISNULL(amt.Amount,0) AS Amount,
        CAST(NULL AS DECIMAL(28,17)) AS InterestAmount,
        CAST(NULL AS DECIMAL(28,17)) AS Balance
   INTO #Work
   FROM cteRate rate
   LEFT JOIN #Refunds amt
     ON rate.Acct_No = amt.Acct_No
    AND rate.[Year]    = amt.[Year]
    AND rate.[Month]   = amt.[Month]
;


-- scale up the table yuck but it's a one-off
DECLARE @Acct_no INT, @Counter INT
SET @Counter = 1

WHILE @Counter < 3220 -- 322 corresponds to 10,000-ish rows
BEGIN
	SELECT @Acct_no = MAX(Acct_no) FROM #Work

	INSERT INTO #Work (ExecSeq, Acct_no, MonthDate, MonthRate, Amount)
	SELECT ExecSeq, Acct_no = CAST(@Acct_no+1 AS VARCHAR(20)), MonthDate, MonthRate, Amount 
	FROM #Work WHERE Acct_no = CAST(@Acct_no AS VARCHAR(20)) -- 25 rows
	SET @Counter = @Counter + 1
END

-- put in the all important execution order
UPDATE w SET ExecSeq = t.ExecSeq
FROM #Work w
INNER JOIN (SELECT ExecSeq = ROW_NUMBER() OVER(ORDER BY Acct_no, MonthDate), Acct_no, MonthDate FROM #Work) t
ON t.Acct_no = w.Acct_no AND t.MonthDate = w.MonthDate

--===== Add the very useful clustered index
CREATE CLUSTERED INDEX [ExecSeq] ON #Work ([ExecSeq] ASC)

;WITH Calculator AS (
SELECT ExecSeq, 
	Acct_no, 
	Amount, 
	MonthDate, 
	MonthRate, 
	InterestAmount = ISNULL(InterestAmount,0) 
FROM #Work w
WHERE ExecSeq = 1 
UNION ALL
SELECT cr.ExecSeq, 
	ISNULL(cr.Acct_no, lr.Acct_no), 
	ISNULL(cr.Amount, 0), 
	cr.MonthDate, 
	cr.MonthRate, 
	InterestAmount = CAST(CASE WHEN cr.Acct_no = lr.Acct_no THEN (lr.Amount + lr.InterestAmount) * (1 + (cr.MonthRate)) ELSE 0 END AS DECIMAL(28,17)) 
FROM Calculator lr
INNER JOIN #Work cr ON cr.ExecSeq = lr.ExecSeq+1 
)
SELECT * FROM Calculator ORDER BY ExecSeq OPTION (MAXRECURSION 0)